Sep 19, 2023

A U.S. judge declined to order Binance.US to make its executives more available for depositions, or for the U.S. Securities and Exchange Commission (SEC) to back down in its demands for more documents.

Video transcript

The state of crypto is presented by Ron connecting the world to the power of Cryptocurrency. A US judge declined to order Binance us to make its executives more available for depositions or for the SEC to back down in its demands for more documents during a hearing yesterday. Joining us now to discuss is former sec enforcement branch chief and began law attorney Lisa began. Welcome back to the show, Lisa. Good morning. It's great to be here. Great to have you here. Now, why don't you unpack what's going on for us to kick this off? Does Binance us even have any US executives left? What's happening here? Well, that's hard to tell. I haven't checked the, the uh list as of this morning, but there certainly does seem to be an exodus. Uh That doesn't mean that those people are not available for depositions or um to assist in the sec in the investigation. So I, I think that's, that concern is a little overblown. Uh People leave all the time and they are still deposed. Uh I, I think the, the kerfuffle here. Um and, and certainly the judge, I think kind of did a Taylor swift move of like y'all need to calm down like this, this has gone over the top. Um, that I think the, the SEC has an expectation when it goes into litigation that it's already done its investigation. You know, the staff is done, they've presented to the commission they've gotten authority. So why is anybody in their way, they should be able to get everything that they ask for and when they go up against a really big player with deep pockets like finance, they get pushback and they got some legitimate pushback here. I mean, this was all about exp expedited, discovery about um issues addressed in the consent order, which was entered in, in lieu of instead of a temporary restraining order. So this was negotiated, the language there talks about, you know, we have to, we the SEC are entitled to know about the safety and security, custody of these assets in the wallets. And then it appears the SEC is kind of gone on a frolic and detour kind of seeking to get lots and lots of other discovery. Let, let, let's kind of step back a second for, for the folks at home who maybe haven't been paying close enough attention to what's going on with finance and what this particular case has is doing. Uh and specifically the ca the situation of custody and Sao sna the snafu with sa I mean, what, what exactly is going on here? Um And, and, and what's the big issue that the SEC is saying is a problem that is requiring a court case? Well, going all the way back to the complaint. The SEC is saying that Binance is operating as a, an unauthorized, unregistered, uh, broker dealer and exchange and that it's offered unregistered securities. In addition, it's also said that there's fraud. So now the in, in connection with that, the SEC brought its case in June and brought a temporary restraining order motion seeking to have everything frozen in place. What uh Binance responded and negotiated a consent order so that they could have an agreement, agreement over what the status quo would be while the litigation was taking place. And that's really what this is about. Um I, I can't even pronounce it correctly but the snafu over, um, is it a Binance entity? We think it's, uh, it's custody? Right. Right. So I, I think the SEC is legitimately confused. Um It may be that Binance was a little casual in addressing, you know, questions that the SEC had about custody. You can't be that casual about it. It could be that Bin's lawyers while they are extremely well qualified lawyers, sometimes they don't understand all the ins and outs of crypto and so they might be great sec lawyers, but they may have misunderstood what somebody told them. I think what's what, you know, probably really sent, sent the judge, you know, had the judge send everybody back to their rooms to just chill out. Was that um, the SEC is demanding depositions of, you know, the Chief Financial Officer, the CEO um seeking all kinds of documents that really don't seem to be relevant necessarily to um, whether the company is complying with the consent order and keeping the, the, the asset safe. Hi, Lisa, nice to see you. So this seems like another one of these examples that sec critics will say this is regulation by enforcement, right? So I guess the question is, is there because as we know, the US does not have a federal licensing regime for exchanges, right? It's very like state by state, case by case. Is there some sort of regulation that could have potentially avoided this outcome? I mean, is this one of these areas where, you know, this something like this could have been, I don't know, handled kind of more preemptively rather than after the fact. Oh, definitely, if there were a, a clear way for Binance to have registered and, and been able to register as a crypto exchange, uh that would have avoided and it, and it would have avoided the unregistered um, operation as an exchange. It would have avoided the unregistered broker dealer charges. Um, and, and it really would have avoided the entire case. I think so. Yes. The fact that there isn't a road to, for them to register is there, it could have been avoided. Yeah, I guess the argument that that the sort of crypto industry would make, is that like, that's, it's impossible. I mean, they, they say it's impossible to register, right? Because it doesn't fit the category. But anyway, but I guess my, my other question for you and obviously this is sort of an opinion question because we don't know. But is Binance us just basically over like, is, is this, is this the end of Binance? U si mean, do they have any chance of coming back from this boy? Is that hard to imagine? What would the, what would it look like? Um uh uh the SEC just does not like crypto and is not so far, there doesn't seem to be any plan to come up with a way to handle custody of crypto assets. And in the absence of that, I, I don't see uh a path to crypto being able to operate really in the US, Lisa. You know, I brought up the exodus of executives at the beginning of the segment in a little bit of a lighthearted way. But I think a lot of people are looking at that and saying if so many executives are leaving, there must be something going on behind the scenes that we don't know about. Uh this is another opinion question for you. But what do you make of that when you see uh most of the executive suite step away from the firm as they're being investigated by the SEC? Does that does that say that maybe there is something going on behind the scenes that the SEC should be looking into? Not necessarily, it, it, it could be, it could be that there's something nefarious that, you know, now everybody knows about and want, wants to escape. But it also could be that there isn't a future for them. So they're leaving so that they can go overseas and um find that job where there actually will be a future. A lot of them were Americans. I, I would assume that the complaint that the, the reason they left isn't because they didn't like the, the way snacks were stocked in the snack uh, machines and things like that. I mean, that it, when, when they lose, they, when they lose a, uh uh you know, the, the, the person in charge of a council and things like that, I mean, like, doesn't, does that raise red flags? At least to regulators when they see that? Do they go? Yeah, we got them the, when you're already in litigation and, and it really is a bet. The company case. I, I think you do see people leaving um, because they're worried about their own future. So, yes. Would I be concerned? Absolutely. If I were an investor, I'd be concerned. Investor is in an account holder is what you're saying. Correct. Yes. All right. It's also also just to, I mean, at least, I don't know what you think, but it's possible that people are leaving, not necessarily because of wrongdoing, but they're leaving just because of the question that I asked earlier that there just doesn't seem to be much hope for Binance us and they're just getting out now. So, you know, it's, there's different ways to read the situation. Nobody wants to be the last person to be jumping off the sinking ship. Yeah, I mean, get out and start looking for those great opportunities that are out there in Asia where you were talking to people. Yeah, Lisa, we're gonna have to leave it there. Thanks so much for joining us this morning. It's always a pleasure having you on. Thank you. That was former sec enforcement branch chief and Braganza law attorney Lisa Braganza.

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