What the Fuck is Up With The Secret SEC Motion Relating to Binance?

What’s Up With The Secret U.S. SEC Motion Relating to Binance? 

In the U.S. SEC/Binance litigation, the U.S. SEC has filed a sealed motion for leave to file documents under seal, according to an SEC court filing late yesterday. Filing a court document “under seal” allows sensitive or confidential information to be filed with a court but kept off of any public record.

Along with the SEC motion, the SEC also filed 37 supportive submissions including multiple exhibits, a proposed order and a declaration of SEC trial attorney Jennifer Farer.

A Rare SEC Tactic

Filing any court document under seal is a rare move by the SEC. The SEC is a civil (not a criminal) enforcement agency; thus, in stark contrast to criminal prosecutorial filings, SEC motions (and enforcement actions) are typically filed openly and free for everyone to read. 

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 of the few strategic reasons that the SEC might prefer to file court documents under seal are when the filing of an SEC motion or other court document could somehow:

1) Interfere with, or reveal secret details about, a criminal investigation or prosecution conducted by the U.S. Department of Justice. For example, U.S. DOJ is reportedly investigating Binance and may have convened a grand jury and grand jury proceedings are deemed “secret” by U.S. statute (ojp.gov/ncjrs/virtual-…).

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. Along these lines, the U.S. SEC staff will avoid taking any action that could potentially disrupt or jeopardize anything U.S. DOJ is doing with respect to Binance (or any other criminal investigation); or

2) Place a witness or company at risk (which typically involves redactions rather than a full court sealing).

Why Now?

In my opinion, and this is only a guess, the U.S. SEC‘s secret and extraordinary court filing, which appears to be highly comprehensive, likely touches upon nonpublic Binance-related money laundering allegations or other potential criminal conduct. linkedin.com/pulse/why-us-d…

In other words, my take is that the secret U.S. SEC filing likely relates to an existing U.S. DOJ investigation of Binance and could, directly or indirectly, describe the heretofore unknown contents of an impending U.S. DOJ Binance-related indictment or an indictment already filed under seal — which the U.S. DOJ would prefer to keep secret.

And my guess is that Binance will likely NOT oppose the U.S. SEC sealing motion for fear of making public potentially inculpatory evidence or potentially scathing criminal allegations relating to Binance’s activities.

But then again, bear in mind that this is a rare SEC action, which makes the situation tricky to decipher and the outcome challenging to predict. If Binance does oppose the U.S. SEC seal request, then the U.S. SEC motion more likely relates to the U.S. SEC’s desire to keep the identity of a witness secret, and Binance would prefer that the world know the names of any of Binance’s accusers.

Get The Popcorn

Under any circumstance, that this SEC seal-seeking filing is unusual, odd and uncommon cannot be overstated. In my almost 20 years in the SEC Enforcement Division, including 11 years as Chief of the SEC’s Office of Internet Enforcement, our team worked on and led a broad range of SEC investigations which involved parallel U.S. DOJ investigations and lots of litigation — and I can’t recall ever seeking to file a motion or any other court document under seal.

Fail not at your peril Binance — strange things are afoot at the Circle K.