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Binance, Binance.US, and Changpeng "CZ" Zhao have released their initial responses to the SEC's lawsuit, which, on the surface, seems to carry significant implications. However, as the day progresses, we anticipate gaining further insight into the progress of the case and the court's perspective on the presented arguments.

In a related context, I am currently in Washington D.C. to provide coverage of the SEC v. Binance hearing regarding a temporary restraining order. Regrettably, my presence is limited to today only. However, if anyone happens to be near the D.C. District Court after the conclusion of the hearing, please don't hesitate to come and say hello.

Early arguments

The narrative

Binance.US and Binance have submitted their initial responses to the U.S. Securities and Exchange Commission (SEC) on Monday, contending that the SEC's request for a temporary restraining order would impede their ability to fulfill financial obligations to employees, vendors, and other parties. These filings also provided a glimpse into their defense strategy against the SEC's specific allegations.

Why it matters

Last week, the SEC leveled significant accusations against Binance, and today marks the first courtroom examination of those allegations.

Breaking it down

Binance.US submitted a compelling response to the SEC's motion for a restraining order, expressing that granting it could potentially lead to the cessation of their operations.

"The SEC seeks unnecessary and unjustified relief. Far from requesting relief that is 'carefully calibrated' to 'maintain[] the status quo' ... the SEC’s proposed remedies would effectively end BAM’s business," the filing said, calling the proposed temporary restraining order “draconian.”

District Judge Amy Berman Jackson, presiding over the D.C. District Court, instructed Binance and Binance.US to provide a detailed account of any variances in their proposed agreements prior to the commencement of the hearing, specifically by 1:00 p.m. ET (17:00 UTC).

In addition, she instructed the SEC to outline the modifications it seeks in the Binance.US proposal that would render it satisfactory to the agency, instead of pursuing the suggested temporary restraining order.

“No additional argument or explication may be submitted by any party at this time,” the judge ordered.

Without overanalyzing the situation, this minute order provides insight into the judge's potential approach to the initial matters in the lawsuit. It implies that Judge Jackson may not be inclined to grant a complete temporary restraining order but is open to implementing certain limitations on the accessibility of Binance.US's funds.

The disparities between the Binance.US and Binance suggested provisions are minimal, primarily relating to matters such as capitalization. However, the Binance filing goes further by explicitly outlining the inclusion of root access to Amazon Web Services instances as a potential component of the software involved.

The SEC's filing proposes extending the restrictions to include staking services as well as access to AWS.

Hinman’s emails

Ripple, currently embroiled in an SEC lawsuit, has released a series of emails involving officials discussing the content of the renowned 2018 speech by former SEC Director of Corporation Finance, William Hinman. This speech gained attention as Hinman expressed the view that Ether was likely not considered a security.

I discussed the emails in detail in this article, while my colleague Shaurya Malwa promptly analyzed the impact on prices in this piece.

What stands out is the extensive level of consideration given to the emails. Furthermore, we are provided with a unique glimpse into the process of careful decision-making, as SEC officials engaged in debates regarding the clarity of the speech and offered suggestions regarding the Howey analysis.

One aspect that particularly captivates me is that an initial iteration of the speech completely omitted any mention of ether (ETH). The draft from May 25, 2018 primarily discussed bitcoin (BTC) while emphasizing the conceptual transition of tokens from securities to non-securities.

(The Wall Street Journal) The Journal examined North Korea's endeavors to pilfer cryptocurrency as a means to finance its nuclear weapons program.