In a recent court hearing, the Securities and Exchange Commission (SEC) faced a setback as a federal magistrate judge denied their request to access the software underlying Binance US, the American arm of the renowned cryptocurrency exchange. The ruling comes as a part of the SEC’s ongoing legal battle against Binance, which began in June of this year.
Federal Magistrate Judge Zia Faruqui, presiding over the case, expressed his reluctance to grant the inspection, advising the SEC to formulate more precise requests and engage with additional witnesses. According to Bloomberg, Judge Faruqui emphasized the importance of tailored inquiries in order to progress the case effectively.
At the heart of the SEC’s lawsuit is the allegation that Binance US, Binance Holdings, and Binance CEO Changpeng ‘CZ’ Zhao were operating an unlicensed exchange. The regulatory body contends that the perceived separation between Binance US and Binance Holdings is superficial, and that client funds were being moved out of the United States in violation of securities regulations.
A particular focus of the investigation lies on Ceffu, a custody platform rebranded earlier this year from Binance Custody. The SEC suspects that Ceffu has played a pivotal role in funneling funds between Binance US and Binance Holdings, potentially enabling the alleged illicit transfers of US customer funds beyond the nation’s borders.
The request for an examination of Binance’s software was primarily aimed at unraveling the extent of Ceffu’s involvement in the alleged unlawful transactions. While the recent denial by Judge Faruqui marks a setback for the SEC, it is anticipated that the regulatory body will persist in their pursuit of further evidence.
This latest development underscores the complexity and contentious nature of the legal battle between the SEC and Binance, and foreshadows potential future confrontations as both parties continue their efforts to bolster their respective positions.