According to The Wall Street Journal, the U.S. Securities and Exchange Commission (SEC) is still searching for evidence to prove that Binance.US has a backdoor similar to FTX to control customer assets.
In June of this year, the SEC filed a lawsuit against Binance and Binance.US, accusing the exchange of engaging in the sale of unregistered securities, and alleging that Binance and its founder Changpeng Zhao (CZ) were involved in a complex conspiracy involving fraud, conflicts of interest, lack of disclosure, and willful disregard of the law. One of the allegations is that the exchange arbitrarily misappropriated customer assets, including transferring funds to Sigma Chain, a Swiss company controlled by CZ.
Reportedly, during a court hearing on November 27, Binance.US’s lawyers argued that the SEC had no evidence of asset misuse and requested the judge to consider prohibiting the regulatory agency from investigating potential fraudulent activities. The lawyers for Binance.US also mentioned the soaring costs of litigation and pointed out that since the SEC filed the lawsuit, Binance.US’s assets have plummeted by nearly 90%, and its user base has halved.
On November 22, Binance pleaded guilty and agreed to pay over $4 billion to settle the U.S. Department of Justice’s investigation into its violations. As part of the settlement agreement for the DOJ criminal investigation, CZ made the decision to step down and plead guilty. However, the case did not include any fraud-related claims brought by the SEC in its lawsuit.
Judge Zia Faruqui, who is responsible for overseeing the lawsuit between Binance and the SEC, stated that Binance’s guilty plea reduces the possibility of Binance.US and CZ misappropriating customer assets, and requested Binance.US and the SEC to resolve the dispute and provide him with updates by December 15.
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Related report: “SEC opposes Binance’s motion to dismiss lawsuit, calling its arguments reliant on a ‘distorted interpretation’ of the law.”