In June, the watchdog sued Binance.US, the exchange's global parent Binance Holdings and founder Changpeng “CZ” Zhao, alleging they ran an unlicensed securities exchange. The SEC's findings in the case so far demonstrate "the urgent need for an inspection," Monday's filing said, as the regulator restated its worries about Binance's use of custody platform Ceffu.
The SEC believes Ceffu, rebranded earlier this year from Binance Custody, may also be serving Binance.US, and therefore being used to shift U.S. customer funds out of the country in violation of a previous agreement to not do so.
The agreement was entered into because Binance.US' holding company BAM Trading Services failed to convince the SEC that it controlled its customers' assets, the filing said, adding that such conclusions were "undermined by BAM’s own documents and inability to keep its story straight, [which] did not actually establish that BAM exercised exclusive control over its customers’ assets."
"The SEC seeks an order compelling BAM to produce documents and communications concerning any entity providing it wallet custody software and related services," the filing said, referring to BAM's "evolving" explanations for Ceffu.
The regulator further accused the company of providing "inconsistent representations about key facts, slow-rolled small productions of documents and information, and stonewalled on entire categories of information that would likely shed light on its shaky assertions concerning the custody of customer assets."
While calling Zhao "an individual who views himself outside the jurisdiction of any court," the SEC asked the court to reject Binance's "half-hearted claims of irrelevance, prejudice, and burden," and instead compel the exchange to provide the depositions, communications and other information the regulator is requesting.
Meanwhile, Ceffu has said it is a "fully independent third-party technology service provider," and not a part of Binance, although its ties to the crypto exchange remain somewhat unclear.
A hearing on the case is set to take place later Monday, at 3:00 p.m. EDT.
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