SEC vs. Binance: SEC investigates Binance asset custody

taketonews

The SEC is investigating the relationships between Binance, crypto custodian Ceffu and other Binance subsidiaries. Who controls the digital assets?

• Is there a connection between Binance.US and Ceffu?
• Are the connections between Binance.US and the custodian bank “invented”?
• Who controls customer assets in the Binance ecosystem?

Following the lawsuit against Changpeng “CZ” Zhao for operating an unregistered securities exchange, the US Securities and Exchange Commission (SEC) highlighted the “urgent need” for a closer investigation into the connections between Binance and Ceffu, which was renamed Ceffu in February this year, in a statement in mid-September Binance Custody depository platform. According to the SEC, Binance.US could also use Ceffu to illegally transfer US customer funds out of the country. The regulator considered such an agreement necessary because, in its opinion, BAM Trading Services, the holding company of Binance.US, could not prove that its customers’ digital assets are exclusively under its control.

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Binance was uncooperative during the investigation, which is why the SEC requested full access to Binance US’s software and operational documents. The US regulatory authority did not get away with this in court, and the application for unrestricted access to the Binance.US software failed.

Binance subsidiaries Ceffu and BAM Trading Services

It is not clear exactly how the complications between Binance.US, Ceffu and BAM Trading Services appear to the US Securities and Exchange Commission, because in publicly available documents from the SEC on the investigation against Binance, passages on the background information are blacked out. Other documents, such as the Murphy Declaration, which she relies on in her argument, are not publicly available.

After attempting to shed light on the relationship between Binance subsidiaries, the SEC concluded that it was “more than likely that BAM still does not understand what Ceffu is.” While Changpeng Zhao accused the SEC via

Ceffu is not a Binance unit, but a “completely independent third-party provider of technology services,” a spokesperson for the company rejected the SEC’s allegations, according to CoinDesk. “Prior to the rebranding in February 2023, our entity was always run independently of Binance activities and was therefore completely separate from Binance.”

However, it is not clear from the publicly available documents to what extent there is a separation of ownership or Ceffu management from Binance or Binance.US is one of the central allegations of the SEC. If a clear line was drawn between the two companies after the name change, the US Securities and Exchange Commission has no documents regarding this. According to the latest information from the SEC, the company is still owned by Changpeng Zhao, writes CoinDesk. Ceffu is now registered in Lithuania through the Binance subsidiary Bifinity, whose sole shareholder is Zhao. In addition, two of Bifinity’s three board members also work for Binance.

The SEC is also concerned with “conflicting representations” regarding the security and custody of customer funds, as can be seen in the filing. The authority does not have detailed information about the wallet custody software and the associated services that the SEC is demanding. Binance subsidiary BAM Trading Services cannot sufficiently prove that it exercises exclusive control over customers’ assets.

There is said to have been a transaction worth $250 million between Binance boss Zhao and the Binance subsidiary BAM. The SEC’s announcement states that the Binance CEO allegedly received the money from his subsidiary. This brings back memories for the SEC of the ominous complications and transactions between the formerly largest crypto exchange FTX and its sister company Alameda, which is why it is particularly emphatic here. However, on

Illegal securities trading? The SEC’s lawsuit against Binance

In the legal dispute over unauthorized securities trading between the SEC and Binance, the crypto exchange denied all allegations and filed a motion to dismiss the lawsuit in court at the end of September. Binance sees the debt as lying with the SEC, which has failed to draw up appropriate regulations and is therefore now retroactively applying guidelines to the crypto sector. According to Binance, the lawsuit does not stand under the applicable securities laws because the supervisory authority subsequently interpreted the securities laws differently and even distorted them in order to apply them to the crypto sector. “The SEC is also seeking to broaden its jurisdiction globally to expand transactions on foreign cryptocurrency platforms, contradicting Supreme Court precedent that says the agency’s regulatory authority ends at the U.S. border. And the SEC is pursuing these new theories retroactively and seeks to impose liability for sales of crypto assets that occurred as early as July 2017, before the SEC issued public guidance on cryptocurrencies,” the motion to dismiss reads.

Editorial team finanzen.net



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