SEC takes further steps in its ongoing lawsuit against Binance US, accusing the exchange of evidence non-disclosure and revealing concerns about how customer assets are managed through the affiliated custodial service Ceffu.
Read more to understand the implications for Binance and the cryptocurrency market.
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New Legal Filings in Binance Lawsuit
The U.S. Securities and Exchange Commission (SEC) submitted new court documents on the 14th, accusing Binance of being uncooperative in disclosing evidence.
The SEC also revealed some previously undisclosed claims. These point to the possibility that Global Binance may be managing U.S. customer assets through its affiliated custodial service "Ceffu."
Demanding Transparency: SEC’s Criticisms
Firstly, the SEC criticized BAM Trading, the operating company of Binance US, for providing very limited information to prove that their customer assets are not subject to the whims of Global Binance or its CEO, Changpeng Zhao (CZ).
In this regard, the SEC has petitioned the court to mandate the release of relevant documents from BAM, and to reject any protective orders filed by BAM.
Binance had filed for a protective order on the 11th to limit the scope of evidence disclosure. They requested the court to limit the number of depositions from Binance employees to just four, among other things.
The SEC argues that wider evidence collection is essential to assess whether customer assets have been managed appropriately.
Concerns About Customer Asset Management
The SEC expressed concerns about the relationship with custodial firm "Ceffu," some of whose claims were sealed but partially revealed this time.
The SEC argues that BAM has violated its consent order that pledges to hold all customer assets within the U.S. under the control of BAM.
Ceffu is a company that provides cryptocurrency custodial services to institutions. SEC officials have previously claimed that this company grants specific rights or benefits to Binance’s CZ.
The SEC points out that Ceffu hosts wallet and key shard software, and manages the AWS environment that holds the keys to BAM's customer assets.
The implication is that Ceffu, which is affiliated with Global Binance, appears to be managing assets of U.S. citizens on Binance US.
The SEC has demanded that BAM provide information concerning the structure and system of its cryptocurrency wallet, or at the very least, disclose details regarding the wallet’s infrastructure, system, software, protocols, management, and access.
Meanwhile, a spokesperson from Ceffu stated that the company "always operates as an independent and separate wallet solution" and is a completely independent third-party company from Binance.
Former CEOs Depart Amid Controversy
Brian Schroeder, the former CEO of Binance US, resigned on the 12th. The company has also announced the layoff of one-third of its employees due to the impacts of the SEC lawsuit.
John Reed Stark, a former chief of the SEC's Cyber Unit, speculated that the SEC and the U.S. Department of Justice might reach out to Schroeder and other departed employees for cooperation.