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Binance Accuses SEC of Misleading Public Amid Ongoing Lawsuit

BY Erika Lee

June 22, 2023

Binance.US, its global counterpart Binance Holdings Limited, and the firm’s CEO Changpeng “CZ” Zhao have accused the U.S. Securities and Exchange Commission (SEC) of deliberately misleading the public through statements it made surrounding a currently unfolding securities lawsuit. The allegation is part of a motion filed by legal representatives of the cryptocurrency exchanges on June 21 in the U.S. District Court for the District of Columbia.

“No compelling evidence”

The filings argue that the SEC’s assertions made on June 17, as detailed in a press release, were “misleading” and called for the financial watchdog to adhere to the “applicable rules of conduct.” The filing specifically referred to SEC Enforcement Director Gurbir Grewal’s claims that CZ and Binance could “commingle customer assets or divert customer assets as they please” and sent an order requiring all parties involved in the lawsuit to return to the United States.

Binance representatives fought back in the June 21 court filing, stating, “The SEC has no evidence that BAM [Binance.US] customer assets have been dissipated, commingled or misused in any way.”

The filing further argued that the SEC’s press release seemed “designed to introduce unwarranted confusion into the marketplace, which could have the effect of harming BAM customers rather than protecting them. It also risks tainting the jury pool with misleading descriptions of the evidence concerning the Defendants.”

If approved by a federal judge, the motion could limit the SEC’s capacity to make public comments about the Binance lawsuit throughout the case’s duration, particularly comments that “may materially impact court proceedings.” As part of their argument, Binance’s legal team included excerpts from a June 13 hearing where SEC counsel admitted there was no proof of Binance.US assets being funneled overseas.

The motion is part of the SEC’s broader lawsuit, initiated on June 5 against Binance, Binance.US, and CZ, accusing them of offering unregistered securities and neglecting to register as an exchange or a broker-dealer clearing agency. At the time, SEC Chair Gary Gensler alleged that CZ and Binance had deceived investors about the robustness of their risk controls, with the regulator pursuing disgorgement and other penalties.

The SEC moved to have the court freeze all Binance.US assets, but a compromise was reached whereby only the exchange’s employees can access client funds during the lawsuit.

Editor’s note: This article was written by an nft now staff member in collaboration with OpenAI’s GPT-4.

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