News - New findings from the lawsuit between Binance and the SEC

By Mike Hesp

New findings from the lawsuit between Binance and the SEC

Laws and regulations
USA
Exchanges

New findings from the lawsuit between Binance and the SEC again point to problems for the world's largest crypto exchange.

Amid yesterday's hoopla over the stage win by Grayscale against the SEC, one thing was almost lost: a undercover filing by the SEC in court in the case against Binance. An extremely rare event that could indicate an ongoing criminal investigation against the world's largest crypto exchange. At least that is the opinion of John Reed Stark, former head of the SEC's Division of Internet Enforcement.

Stark has always commented on events surrounding lawsuits between the SEC and the crypto industry. Although critical of the SEC, he recently saw the authority vindicated on many issues, even though the authority was rebuffed by the courts in the Ripple case and now Grayscale. Binance, however, faces a much less merciful fate, if Stark's latest assumptions are to be believed.

SEC keeps a low profile

As a civil authority, the U.S. Securities and Exchange Commission usually acts transparently. As such, all filings and lawsuits are public. Only in "rare cases," says Stark, does the SEC use the tactics seen here. The "sealed filing" request allows "sensitive or confidential information" to be turned over to the court, out of public view, Stark said. According to him, the SEC had also filed some 37 "supporting documents" with the court.

These unusual facts suggested that more was going on than the agency's own investigation. The action, he said, points to two possibilities. Either the SEC is trying to protect the identities of key witnesses or companies. For this, it is usually enough to make individual passages in the documents unrecognizable. Or the documents overlap with ongoing criminal investigations by another agency, such as the Department of Justice (DOJ).

Justice Department on Binance's trail?

For some time now, it has been rumored that the U.S. Department of Justice is on the trail of crypto exchange Changpeng Zhao (CZ). According to recent reports, the agency is considering a lawsuit against its company, but is hesitating because of concerns about a chain reaction à la FTX. Therefore, as John Reed Stark speculates, the DOJ may have even already surreptitiously filed charges against Binance to settle the case behind closed doors. In fact, if the crypto exchange does not resist the SEC's request, this would be very likely, the former SEC official said.

Regardless, the U.S. Securities and Exchange Commission appears to be in possession of very extensive and incriminating evidence. Presumably this is related to "non-public, Binance-related allegations of money laundering or other criminal conduct," Stark said. In his 20 years at the SEC, he worked with the Justice Department on numerous cases and almost never conducted undercover investigations. The fact that the SEC uses such tactics at all, he said, "cannot be overemphasized."

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