Judge rejects SEC’s request to inspect Binance.US’ software, technical infrastructure

Courts have rejected the U.S. Securities and Exchange Commission’s request to inspect Binance.US’ systems, Bloomberg reported on Sept. 19.

The SEC did not succeed in convincing Federal Magistrate Judge Zia Faruqui to immediately permit an inspection of the Binance.US’ software and technical infrastructure. The judge said he was not “inclined to allow the inspection at this time.”

Judge Faruqui asked the securities regulator to produce more specific requests and speak with additional witnesses instead of granting the agency’s current request.

He also noted that the issue is one of many that has prolonged the case. Despite the SEC’s claims of insufficient information, Judge Farqui said during the latest hearing that the court would soon need to “bite the bullet and move on with the case.”

The SEC’s request for a systems inspection is one of several contained in a Sept. 14 filing. There, the agency asked for Binance.US to make its systems and employees, including its crypto wallet infrastructure, available for an inspection by order of the court. It alternatively aimed to have Binance.US produce “diagrams and infrastructure, systems, software, protocols, controls, and access information” as an early response.

The SEC acknowledged that whether to allow such an inspection is for the court to decide, adding that each party’s interests should be balanced.

The agency did, however, note that inspections have been allowed in other cases and said that Binance.US has not credibly argued that such an investigation would impose a burden. Furthermore, it said that Binance.US has claimed that it does not possess certain documents only to contradict this later, thus necessitating an inspection.

Allowance of SEC other requests is unclear

It is unclear whether the judge’s rejection of a systems inspection is final, or whether the rejection extends to other parts of the SEC’s request. The SEC also asked Binance.US to provide communications regarding its control over customer assets, other financial documents, and supplements to its earlier interrogatory responses.

The SEC also asked for information on Binance.US’ crypto wallet custody practices and its relationship with Ceffu, a wallet formerly known as Binance Custody. Binance CEO Changpeng Zhao recently denied that Binance.US has ever used Ceffu or Binance Custody — though SEC filings suggest that the company has used the service.

It should be noted that the SEC refers to Binance.US by its parent group of companies, which operate under the BAM banner, in most of its court filings.

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