Judge Faruqui Issues Minute Order Supporting SEC’s Motion to Compel Against Binance.US

  • Magistrate Judge Faruqui schedules a key hearing on September 18 in the legal dispute between the SEC and Binance, Binance.US, and their CEO “CZ.”
  • Binance and Binance.US jointly seek a protective order to safeguard sensitive information in the lawsuit

In a significant development, Magistrate Judge Zia M. Faruqui has scheduled a crucial hearing date in the ongoing legal dispute involving the U.S. Securities and Exchange Commission (SEC) on one side and Binance, Binance.US, and their CEO, “CZ,” on the other. The next hearing has been slated for Monday, September 18.

Binance and its subsidiary, Binance.US, have jointly submitted a motion seeking a protective order. This move aims to ensure the confidentiality of sensitive information intertwined with the lawsuit. Concurrently, both parties have registered their opposition to the SEC’s request to compel the discovery process, indicating a contentious debate over the extent of information sharing.

Judge Faruqui Takes on Mediation Role

Judge Amy Berman Jackson has entrusted Magistrate Judge Faruqui with the responsibility of mediating the ongoing discord between Binance.US and the SEC. The focus of this mediation centers on the issues surrounding the protective order. Binance.US contends that the SEC is pushing beyond the confines of a previously agreed-upon consent order and is actively seeking protection for its CEO and CFO from deposition.

As the legal battle between Binance, Binance.US, and the SEC rages on, a pivotal hearing set for September 18 looms large. The joint motion for a protective order and the opposition to the SEC’s discovery request underscores the ongoing negotiations and disputes within this high-profile case. As the case unfolds, expect further developments to emerge.

Binance’s Protective Order Request

Binance’s most recent request for a protective order aims to limit the SEC’s attempts to acquire extensive information and depositions. This situation differs from prior actions, such as a collaborative motion submitted on September 11, 2023, to limit access to sensitive documents categorized as “CONFIDENTIAL” or “HIGHLY CONFIDENTIAL – ATTORNEYS’ EYES ONLY.”

Furthermore, a sealed motion from August 28, 2023, and the accompanying submissions have introduced the evolving legal dispute intricacy.

One notable aspect of this dispute is BAM Trading’s request to restrict the SEC to only four depositions of BAM employees and to withdraw deposition requests for six witnesses, including BAM’s CEO Brian Shroder and CFO Jasmine Lee. Such limitations are considered highly unusual, given the SEC’s standard procedures when pursuing cases involving temporary restraining orders (TROs) and consent orders.

CEO Resignation Amidst Legal Battle

The timing of Brian Shroder’s resignation as BAM’s President and CEO on the same day that Binance’s legal team opposed the SEC’s deposition request has led to speculation. Questions about potential connections between Shroder’s departure and the legal clash between Binance and the SEC have arisen. This development adds an intriguing twist to the situation.

Following Shroder’s departure, Norman Reed, Binance U.S.’s chief legal officer, has assumed his role. This transition coincides with reports of significant layoffs at Binance U.S., affecting over 100 positions, roughly one-third of its workforce. Binance attributes these layoffs to the SEC’s actions, alleging a negative impact on American jobs and innovation.

Whistleblower Opportunities and Legal Implications

Despite Binance’s claims that the SEC is responsible for its current challenges, Shroder’s departure potentially opens opportunities for the U.S. SEC and the U.S. Department of Justice (DOJ) to secure his cooperation, especially if concerns about criminal prosecution or dissatisfaction exist. Given Reed’s prior role as an internal legal officer for Binance, this situation also poses challenges related to attorney-client privilege.

Moreover, the recent layoffs may result in cooperation agreements, grand jury testimony, and the sharing of confidential information. This development raises the prospect of whistleblower claims against Binance, which could yield substantial financial rewards for those involved.

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