In a recent filing on December 8th, the U.S. Securities and Exchange Commission (SEC) made a significant move by asking the court to take judicial notice of newly unsealed documents pertaining to Binance and its former CEO, Changpeng Zhao. The SEC aims to utilize these plea agreements in its ongoing case against Binance as evidence, thereby bolstering its claims and countering Binance and CZ’s motion to dismiss. This development has the potential to reshape the trajectory of the case and impose severe consequences on Binance.
John Reed Stark, the former chief of the SEC’s enforcement division, referred to the unsealed documents as a “treasure trove of fresh and comprehensive Binance-related inculpatory evidence.” These documents are seen by the SEC as a valuable source that supports their allegations and strengthens their arguments against Binance’s attempt to dismiss the case. The SEC is urging the court to acknowledge the admissions made by Binance and CZ in their plea agreements with other agencies such as the Financial Crimes Enforcement Network (FinCEN) and the Department of Justice (DOJ).
One of the key contradictions that the plea agreements expose is Binance and CZ’s claim of not receiving “fair notice” regarding their violations of regulations. While they argue this in their motion to dismiss, their plea agreements with the DOJ directly admit to willingly and intentionally violating laws. Moreover, Binance and CZ confessed to knowingly serving millions of customers in the U.S., constituting over 23% of their user base. These admissions significantly weaken their motion to dismiss and lend credibility to the SEC’s case.
The plea agreements shed light on the extensive compliance obligations that Binance has agreed to undertake. According to Stark, the cost of implementing and executing these obligations could amount to “tens if not hundreds of millions of dollars.” This significant financial burden may prove to be detrimental to Binance’s operations, potentially even leading to its downfall. Stark goes on to assert that the level of governmental oversight imposed upon Binance is unparalleled, stating that no other mega-crypto firm has ever been subject to such rigorous scrutiny.
As a part of the plea agreement, Binance has consented to retain an independent monitor for a minimum of three years. This monitor will be granted unrestricted access to all relevant documents, records, resources, and even former employees. The monitoring requirement placed upon Binance can be likened to “installing bodycams on every member of a global criminal drug cartel, and making the cartel bear the cost” of surveillance. This level of scrutiny presents a significant challenge and could spell the end for Binance if it fails to comply effectively.
The SEC’s request for judicial notice of the plea agreements between Binance, CZ, and other agencies is a decisive move that could reshape the outcome of the case. The newly revealed evidence strengthens the SEC’s claims against Binance and weakens their motion to dismiss. The financial burden and extensive monitoring requirements imposed upon Binance as a result of these agreements have the potential to pose severe challenges and ultimately jeopardize the future of the exchange. As the legal battle unfolds, the implications of these plea agreements will undoubtedly continue to reverberate throughout the crypto industry.