In a recent filing, the U.S. Securities and Exchange Commission (SEC) has requested the court to consider the newly unsealed documents related to Binance and its former CEO Changpeng Zhao’s plea deals with other agencies. This move comes as the SEC seeks to counter Binance and Zhao’s attempt to dismiss the case against them. The SEC argues that the admissions made by Binance and Zhao in their settlement agreements with agencies like the Financial Crimes Enforcement Network (FinCEN) and the Department of Justice (DOJ) support the SEC’s case against the crypto exchange.
Supporting Evidence for SEC’s Case
The unsealed documents, as referred to by John Reed Stark, a former chief of the SEC’s enforcement division, serve as a valuable resource of incriminating evidence against Binance. These documents are described as a “treasure trove of fresh and comprehensive Binance-related inculpatory evidence.” Stark further emphasizes that the SEC wants the court to accept the facts stated in the plea agreements as true, without requiring formal evidence.
The admissions made by Binance and CZ in their plea agreements contradict their arguments in the motion to dismiss. While CZ and the exchange claim that they did not have “fair notice” of regulatory violations, they have admitted in the DOJ plea agreements to having “willfully” violated laws. Moreover, Binance and CZ have accepted that they intentionally served millions of customers in the U.S., with a significant percentage of users located in the country. These admissions weaken Binance’s motion to dismiss, adding weight to the SEC’s allegations.
Extensive Compliance Obligations
The unsealed documents also reveal that as part of its plea agreement, Binance has committed to a high level of monitoring and oversight. According to Stark, complying with these obligations could cost Binance “tens if not hundreds of millions of dollars.” He further warns that such extensive and rigorous oversight might potentially mark the “end of Binance.” This plea agreement stands out as unprecedented, with Stark highlighting that no other mega-crypto firm has ever undergone such intense governmental oversight.
To fulfill its obligations, Binance has agreed to retain an independent monitor for a minimum of three years. The monitor will have access to all Binance documents, records, and resources. This includes access to former employees, agents, intermediaries, and various business partners. Stark compares these monitoring requirements to mandating bodycams on every member of a global criminal drug cartel, with the cartel bearing the surveillance costs.
The extensive oversight and compliance obligations imposed on Binance through the plea agreement could have significant financial implications. Binance may be required to invest substantial amounts to implement and execute the necessary measures. However, the potential cost, combined with the scrutiny and constraints of such oversight, raises doubts about the sustainability of Binance’s operations. As Stark cautions, the intense government involvement outlined in the plea agreement could spell the end of Binance.
The SEC’s request for the court to take judicial notice of Binance and Changpeng Zhao’s plea deals with other agencies reinforces the regulatory watchdog’s case against the crypto exchange. The admissions made by Binance and CZ in their settlement agreements challenge their motion to dismiss and provide additional support to the SEC’s allegations. The extensive compliance obligations and rigorous oversight outlined in the plea agreement present significant challenges and potential financial burdens for Binance. The outcome of this legal battle will have far-reaching implications not only for Binance but also for the broader crypto industry as regulators seek to enforce compliance and accountability.