SEC Unsealed Filings Reveal Concerns About Binance.US’s Collateralization Practices
In a significant development, the United States Securities and Exchange Commission (SEC) has recently unsealed court filings related to the ongoing litigation against Binance.US and BAM Management US Holdings Inc. These filings provide valuable insights into the defendants’ responses and objections to the plaintiff’s initial requests for document production and inspection.
The court filings shed light on the SEC’s doubts regarding Binance.US’s ability to ensure full collateralization of customer assets at critical junctures. This concern stems from an audit conducted by Binance.US’s auditor, which reportedly faced significant challenges in verifying the platform’s complete collateralization. The SEC’s reservations highlight potential risks for investors and emphasize the need for increased transparency and regulatory oversight in the cryptocurrency industry.
Collateralization is a crucial aspect of cryptocurrency trading platforms as it ensures that customer assets are adequately backed by reserves. Maintaining full collateralization is vital for the security and stability of the platform, as it guarantees that customers can easily access and withdraw their funds when needed. Any shortcomings in collateralization practices could expose users to potential losses and undermine market confidence.
Additionally, the unsealed court filings reveal that the SEC has requested extensive documentation and inspection of Binance.US’s internal processes and records. However, Binance.US has raised objections to certain aspects of the SEC’s requests, arguing that some demands are overly broad, unduly burdensome, or duplicative of previous discovery requests and subpoenas in the ongoing litigation.
BAM’s legal counsel, the parent company of Binance.US, has expressed readiness to engage in discussions with the plaintiff to address any disputes concerning the requests’ meaning, scope, relevance, or BAM’s responses and objections.
BAM has raised objections pertaining to the preservation and production of electronically stored information (ESI) and documents that are no longer in their possession, custody, or control but are stored on backup tapes or other media. They claim that accessing such ESI would impose significant search, preserve, and access costs, arguing that they are not obligated to search such sources in response to the requests.
Furthermore, Binance.US asserts the protection of various privileges, including the attorney-client privilege, work-product doctrine, joint-defense or common-interest privilege, and applicable domestic or foreign laws. They maintain that the requests seek information or documents covered by these privileges or other protections, and their response should not be construed as a waiver of those privileges.
Binance.US also contests requests seeking the production of trade secrets or information that is confidential, proprietary, commercially sensitive, or competitively significant to them or any affiliates. They argue that disclosing such information could have adverse effects on their business operations.
It is worth noting that the specific details of BAM’s responses and objections have not been disclosed in the unsealed court filings. However, the filings emphasize that BAM intends to withhold responsive materials based on its objections to each request, except where indicated otherwise. Despite their objections, BAM expresses a willingness to engage in discussions with the plaintiff regarding the requests.
These disclosures raise significant questions about the scope of document production, the burden imposed on the defendants, and the applicability of various privileges and protections. As the litigation progresses, further developments are expected to provide more insights into the case.
Featured image from iStock, chart from TradingView.com.
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About the author - J-S Tremblay
I've been involved in the cryptocurrency world since 2016 and trading since 2019. I started Moon and Lambo in 2021. I'm passionate about crypto and love to share my knowledge. I hate bankers and I hope that cryptocurrency will change the financial world for the better. View full profile...
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