On Monday, the United States Securities and Exchange Commission (SEC) and the largest crypto exchange, Binance, had yet another day in court. And while Judge Zia Faruqui didn’t grant the SEC access to Binance. US’s documents and software, he asked both parties to work together to resolve pending matters.
Concerns over Custody and a Loan
However, concerns around a US$250 million ($387.5 million) loan have caused some confusion among observers of the case. While initial reports claimed the money was loaned to Binance founder Changpeng ‘CZ’ Zhao, it is still not entirely clear where the money came from. CZ made comments about news regarding the matter, saying that things had been mixed up:
A Secret Filing
And then there is the issue of a sealed motion the SEC filed in late August. Former SEC Section Chief John Reed Stark had called the move unusual and suspected that it was under seal for either the safety of a witness or because the U.S. Department of Justice (DOJ) may be working on some criminal investigations.
Semafor had mentioned earlier in August that people close to the issue said the DOJ was worried that in case of criminal action, there could be a bank run similar to the one in the FTX case, which caused a crypto market crash. While neither CZ, Binance, or any other executive have been officially charged or accused of wrongdoing, both Bloomberg and the Wall Street Journal have written about possible risks around Binance and Russia. Binance states that it complies with global rules regarding sanctions.
Australian Customers Affected by Binance’s Troubles
In light of numerous crypto-related scams, some Australian banks have started banning or limiting their customers from interacting with what they call high-risk exchanges. While Australian-based exchanges are not affected at this time, customers of overseas exchanges such as Binance have experienced funding limits to exchanges.
This came after Binance requested, and the Australian Securities & Investments Commission (ASIC) granted, to cancel its financial services license. Chair Joe Longo commented, “As we have said before, ASIC supports a regulatory framework for crypto with a focus on consumer protection and market integrity. The final decision as to the regulatory settings is one for Government.”
Nevertheless, a recent proposal by Senator Andrew Bragg, titled ‘The Digital Assets (Market Regulation) Bill 2023’, also known as the ‘Bragg Bill,’ was rejected by Australia’s Senate Economics Legislation Committee in early September. The committee cited a lack of detail and a misalignment with government policy.
Worldwide Woes
Binance and CZ also came under scrutiny by the U.S. Commodities Futures Trading Commission (CFTC) in March 2023. The CFTC alleged CZ and other Binance entities had breached several provisions of the Commodity Exchange Act (CEA) and CFTC regulations. The exchange also faces headwinds in the UK, Japan, Italy, Singapore, the Netherlands, and Canada, to name a few. Many of these countries’ regulators have either cautioned against trading with Binance due to its lack of a local license or banned Binance from providing services to their residents altogether.
Meanwhile, the court case between Binance and the SEC is scheduled to go into the next round in October. Former SEC Enforcement Branch Chief and Lawyer Lisa Brganca does not hold much hope for Binance. She stated in an interview with CoinDesk, “The SEC just does not like crypto […] There doesn’t seem to be any plan to come up with a way to handle custody of crypto assets.”
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