The Securities and Exchange Commission is licking its wounds after a judge denied its request to access the software powering Binance US, the American arm of the exchange.

In a court hearing on Monday, the regulator had asked a federal magistrate judge to allow an inspection of Binance US’s technical infrastructure, and to force the company to share other requested information as part of its ongoing case against the exchange.

But federal Magistrate Judge Zia Faruqui said he wasn’t “inclined to allow the inspection at this time,” according to Bloomberg. Instead, he said, the SEC should come up with more tailored requests and speak with additional witnesses.

The story is the latest chapter in a legal case that started in June this year, when the watchdog sued Binance US, Binance Holdings and Binance CEO Changpeng ‘CZ’ Zhao for running an unlicensed exchange. The SEC alleges that the separation between Binance US and Binance Holdings is merely cosmetic, and that clients’ money was leaving the United States in violation of securities rules.


Special attention is being paid to Ceffu, a custody platform rebranded earlier this year from Binance Custody. The SEC believes it has been acting as a conduit between Binance US and Binance Holdings, and has been used to shift US customer funds out of the country.

The request for an inspection of Binance’s software was to understand what role Ceffu had been playing in facilitating the alleged illegal transfer. While Judge Faruqui has denied the request, the SEC is unlikely to be deterred.

The SEC vs Binance US

The SEC had claimed during the hearing on Monday that Binance had supplied only three witnesses and fewer than 250 documents in the case so far. The regulator has also alleged Binance US has blocked requests to depose top executives.

"The accelerating mass exodus of BAM employees, now including its CEO and others who may possess crucial information regarding the custody, control, and availability of assets, further underscores the urgent need for expedited discovery into these issues now," Monday's document said.


Lawyers representing Binance US have claimed the SEC’s requests are little more than a “fishing expedition.”

Matthew Martens, a lawyer at WilmerHale who is representing Binance US, said at the hearing that Binance had responded to every “targeted request” by the SEC. “What we are not going to respond to is the foolishness of document requests that came from the government here.”

The American company at first agreed but then refused and said the regulator was making "unreasonable demands" asking for such documents.

Earlier this month, the SEC accused Binance of a "lack of transparency" during its investigation into the crypto exchange. Binance has always said that Binance US—for American customers—is a separate company run independently from its parent.

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