In Q2 2023, the SEC alleged that Binance CEO Changpeng Zhao [a.k.a. CZ] and Guangying ‘Helina’ Chen redirected billions of customer funds. The SEC’s allegations came on the back of the testimony evidence of an SEC accountant who revealed that funds were sent to firms controlled by Zhao via intermediary companies.
Using the accountant’s forensic analysis of bank statements as evidence, the agency contended that $12 billion was sent to Zhao and $162 million to a Guangying Chen-controlled company in Singapore. The Binance executive clarified on X [formerly Twitter] that the allegation was “simply false.” Parallelly, a spokesperson for the company said that the funds were “strictly corporate funds and not user assets.”
Now, the exchange has called out the SEC for not being able to produce evidence that the customer funds were wrongfully diverted. In its latest response to the agency, the exchange labeled the SEC’s motion for further discovery “unduly burdensome” and “freewheeling.” Binance’s lawyers contended,
“The SEC still has no evidence to support its unsubstantiated allegations that imply investor assets have been somehow diverted. All the evidence in this matter—including documents, declarations, and sworn deposition testimony—supports BAM’s [Binance.US] position that it has custody and control of its digital assets.“
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Deposition Burden Outweighs the Benefit: Binance
The exchange further pointed out that the SEC had not justified why depositions of BAM’s CEO and CFO fell within the scope of the “Consent Order.” Lawyers mentioned that the “burden” imposed by these depositions heavily overrode any potential benefit. They also added that the discovery sought by the SEC was disproportionate to the Consent order’s needs.
Right after alleging that Binance was redirecting customer funds, the SEC wanted to freeze assets on Binance.US. However, the agency’s request was declined, and the judge ordered the two parties to instead negotiate continued operations.
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