The former chief of Internet enforcement for the U.S. Securities and Exchange Commission believes that the SEC’s “secret” filing in the Binance case is a “rare” strategy that may be connected to the Department of Justice’s criminal investigation into the cryptocurrency exchange. He emphasized that the move by the securities regulator to file a “seal-seeking filing is unusual, odd, and uncommon,” adding that it “cannot be overstated.”
The Securities and Exchange Commission filed a sealed motion on Monday in the court docket for its action against Binance, allowing it to file private or sensitive information without making it public. As much as over 35 exhibits, a declaration from a trial lawyer for the SEC, Jennifer Farer, and a proposed order were all included in the request. As could be gleaned from the reactions, the SEC’s secret filing has put many at unease.
The noticeable abnormality
In the context of the SEC acting in a non-conventional manner in the Binance Case — John Reed Stark, a former employee of the Securities and Exchange Commission (SEC), wrote a lengthy post on social media site X on Tuesday to discuss what he dubbed a “secret” SEC file in its legal battle with the cryptocurrency exchange firm Binance.
In the Binance case, the securities watchdog submitted “a sealed motion for leave to file documents under seal” late Monday, according to the former SEC official, who noted that a court document filed under seal “allows sensitive or confidential information to be filed with a court but kept off of any public record.” Changpeng Zhao (CZ), the CEO of Binance, and 12 other Binance firms were charged by the authorities in June.
At the moment, Stark serves as president of the cybersecurity company John Reed Stark Consulting. He founded and served as the head of the SEC Office of Internet Enforcement for 11 years. He had also notably been an SEC enforcement attorney for 15 years.
According to him, this “rare SEC tactic” was used since the filing contained sensitive material about a current Department of Justice (DOJ) investigation into Binance, which may include the identity of a witness. Stark, in his formal statement, called attention to the fact that the U.S. SEC’s secret and exceptional court file, which looks to be quite thorough, presumably discusses non-public charges of money laundering involving Binance or other potential criminal activity.
About the SEC’s secret filing, Stark has also opined, “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.”
The unprecedented phenomenon created perplexion
The former SEC Internet enforcement chief pointed out that Binance could oppose the seal request of the SEC. Nonetheless, he stressed that the SEC’s secret filing activity can in no way be trivialized or overlooked. Stark proposed two hypotheses on the possible cause and reason for the SEC’s actions: either the SEC is concerned about endangering a witness or a firm; or that the SEC is attempting to keep from meddling with a criminal investigation being conducted by the US Department of Justice.
“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,” he shared, palpably impassioned about the whole ordeal.
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