Benzinga - The Securities and Exchange Commission (SEC) on Monday raised concerns about Binance.US's asset collateralization practices.
A court filing reveals that Binance US's auditor had difficulties ensuring the company was "fully collateralized at specific points in time."
The SEC's unsealed court documents detail a series of requests for production, where the regulatory body sought information about Binance US's operations, asset management, and internal controls.
Binance.US, in its responses, raised several objections, citing reasons such as the requests being excessively wide-ranging, excessively demanding, or beyond the parameters of the consent agreement.
Interestingly, this news comes ahead of Benzinga's Future of Digital Assets conference on Nov. 14, where discussions about regulatory compliance and the future of cryptocurrency exchanges are expected to be a focal point.
One of the most significant revelations from the court filings is the SEC's request for documents concerning Binance US's efforts to account for and verify the amount of crypto assets on its platform.
The SEC specifically inquired about the company's commitment to holding customer crypto assets on a 1:1 basis.
Another critical request from the SEC pertained to internal or external audits conducted for Binance.US.
The regulatory body sought information about any audits, including those by Armanino LLP and FGMK LLP.
However, the most notable detail emerged from the SEC's request for documents related to the assessment of internal control deficiencies concerning the custody and control of customer assets.
The filings cite auditors' findings that Binance.US relies on the Binance.com custodian to provide addresses holding the assets.
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This reliance "makes it very difficult to ensure the company is fully collateralized at specific points in time."
Binance.US's responses to the SEC's requests have been a mix of objections and proposals for further discussions.
According to the SEC, the company has repeatedly emphasized the challenges posed by the breadth of the requests and has proposed that both parties "meet and confer" to determine the necessity and appropriateness of the information sought.
The broader implications of this development will undoubtedly be a topic of discussion at Benzinga's Future of Digital Assets conference on Nov. 14, where industry experts will delve into the challenges and opportunities presented by the rapidly changing world of digital assets.
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