The U.S. Securities and Exchange Commission’s former head of internet enforcement has detailed why the SEC is a huge winner in the Binance settlements with the U.S. Department of Justice (DOJ), the Treasury, and other federal authorities. He stressed that what Binance has agreed to could “strengthen” the SEC’s lawsuit against the crypto exchange and its former chief executive.
‘SEC Netted a Huge Victory Against Binance’
Former U.S. Securities and Exchange Commission (SEC) official John Reed Stark explained in a lengthy post on social media platform X Wednesday why the settlements between Binance and U.S. authorities, including the Department of Justice (DOJ), are “a huge SEC victory.” He believes that the Binance settlements contain numerous elements that the securities regulator could leverage to bolster its case in the lawsuit against the crypto exchange and its former CEO, Changpeng Zhao (CZ).
The DOJ, the Treasury Department, the Financial Crimes Enforcement Network (FinCEN), and the Commodity Futures Trading Commission (CFTC) held a press conference on Wednesday to announce the Binance settlements, pleas, and consent orders.
Stark, who founded and served as chief of the SEC Office of Internet Enforcement for 11 years, pointed out that the securities watchdog, particularly Chair Gary Gensler, was “conspicuously absent” from the press conference. Noting that “The SEC appears to be the sole U.S. federal government holdout for a Binance-related settlement,” Stark opined:
The SEC netted a huge victory against Binance … without even filing a court document, without even negotiating a settlement agreement, and without even attending the DOJ/CFTC/FinCEN/Treasury press conference.
The former internet enforcement chief proceeded to outline multiple ways the securities watchdog could benefit from the Binance settlements. “The SEC now has at its disposal a treasure trove of fresh and comprehensive Binance-related inculpatory evidence gleaned from the various pleadings, orders, attachments, and other Binance-related charging documents,” he began, adding that they will “provide formidable cannon fodder for SEC investigators and litigators to strengthen their Binance-related accusations and contentions.”
Binance also agreed on multiple monitorships that will “undoubtedly create extraordinary and unique opportunities for the SEC’s investigative and litigation teams to identify and utilize a perpetual stream of newly discovered inculpatory evidence,” Stark described.
Moreover, Stark noted that Binance agreed on “an astonishing level of cooperation” by the exchange, ex-CEO Changpeng Zhao (CZ), and “every single Binance employee.” He added: “The SEC could use the cooperation requirements as leverage during any investigative or discovery disputes … For instance, Binance and Zhao will not want the SEC to complain to FinCEN, DOJ, Treasury, etc. about a lack of Binance-related cooperation, which could, in turn, result in additional fines, penalties [and] even prison time.”
Binance also agreed to file Suspicious Activity Reports (SARs), Stark continued, adding that “any newly filed Binance-related SARS will likely create a novel and continual flow of salient and compelling leads and inculpatory evidence relating to Binance.” In addition, he stressed that “Going forward, when the SEC makes reference to criminal conduct at Binance during the course of their Binance-related litigation, those characterizations will not be hyperbole, rumor or conjecture. Classifications of Binance-related conduct as criminal behavior will be fact.”
In conclusion, Stark noted that in addition to “the devastating facts alleged in the DOJ indictment against Binance” and “the 92 pages of vast and relentless AML violations” alleged by FinCEN, “the SEC could opt to add claims or facts relating to Binance’s failure to escalate red flags of potentially suspicious activity, as well as failing to adopt an AML program reasonably designed for its business.” The ex-head of internet enforcement concluded:
These new AML-related facts/allegations could not only strengthen the SEC’s case but could also trigger greater fines, penalties and disgorgement.
Do you agree with former SEC internet enforcement chief John Reed Stark that the SEC is a huge winner in the Binance settlements with the DOJ, Treasury, and other federal agencies? Let us know in the comments section below.