SEC Hands in Secret Filing in Binance Case

Late Monday, the United States Securities and Exchange Commission (SEC) made a rather unusual move by filing a sealed motion. A sealed motion is a formal request made by one of the parties involved (like the prosecution or the defense) to the judge. This request contains information or materials that the party believes are sensitive, confidential, or shouldn’t be made public for various reasons.

The SEC had sued Binance and its CEO Changpeng Zhao (CZ) in June over multiple alleged securities violations. The suit alleged that CZ, Binance, and Binance.US offered and sold unregistered securities when they made the BNB token as well as the stablecoin BUSD. Binance’s stablecoin has since lost most of its market share and relevance in the stablecoin market.

Former SEC Chief of Internet Enforcement, John Reed Stark, called the filing a rare move for a civil agency because filings of such agencies are usually freely accessible and readable by anyone. Reed said: “After all, it’s in the public interest to know and understand the SEC’s use of U.S. tax dollars, and the U.S. SEC wants its messages heard loud and clear to deter future securities violations.”

Two Possible Reasons for the Secret Filing, as Per Former Section Chief

He pointed out two possible reasons for the way the SEC chose to file this motion. Firstly, he explains the details could pertain to possible criminal investigations the U.S. Department of Justice (DOJ) may be undertaking.

Recall that earlier in August, as reported by Semafor and based on information from sources close to the matter, the DOJ was worried about an FTX-style run on Binance in case of an indictment. According to Bloomberg, Binance is already being investigated by the DOJ over potential Russian sanctions violations.

Stark assumes SEC staff would be very careful not to jeopardize any such actions the DOJ is undertaking, adding: “Also, in connection with its investigation of Binance, U.S. DOJ may be working with confidential informants or whistleblowers, may have wires or other listening devices in place or may even have an active arrest warrant or undercover operation in the works.”

The second reason Stark could envision for the secret motion is the safety of a company or witness. However, he points out that redactions would likely be more suitable in such cases than complete sealings. Stark voices his opinion that the filing could be connected to a DOJ investigation such as “nonpublic Binance-related money laundering allegations or other potential criminal conduct”.

The SEC motion consists of 37 exhibits, a proposed order, and a SEC trial attorney Jennifer Farer declaration. While it is difficult to determine the reasons behind the SEC’s actions, it should be noted that although Stark possesses some insight into SEC dealings as a former section chief, he can only make an educated guess. The actual reasons may soon come to light in yet another crypto-related drama episode.

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