SEC - Page 47

Binance.US has firmly responded to the United States Securities and Exchange Commission’s (SEC) recent motion to compel and reply, characterizing most of the SEC’s demands as “unreasonable” and “unduly burdensome.”

In a legal move made on September 12, attorneys representing BAM Trading Services, the entity operating the Binance.US cryptocurrency exchange, submitted confidential documents contesting the SEC’s request for additional information from Binance.US.

The defendants contended that the SEC’s requests for production and interrogatories were excessively broad, imposing an undue burden and extending beyond the scope defined in the consent order.

They further criticized the SEC’s pursuit of certainty and their requests for depositions of BAM CEO Brian Shroder and CFO Jasmine Lee, deeming them “unreasonable.”

BAM’s legal representatives emphasized that the SEC’s motion failed to identify any evidence implicating Shroder and Lee in the day-to-day management details related to the custody and transfer of customer assets at Binance.US.

The attorneys argued, “BAM’s CEO and CFO have no unique knowledge regarding facts relevant to the limited topics identified in the consent order’s expedited discovery provision.”

They also highlighted that BAM had presented alternative witnesses, like BAM’s Chief Information Security Officer, Erik Kellogg, who possessed more pertinent insights into BAM’s operations.

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The lawyers contended that the burden imposed by the requested depositions far outweighed any potential benefits and that the discovery sought was disproportionate to the needs outlined in the consent order.

Moreover, BAM’s legal team contended that the SEC had failed to provide any substantive evidence to support its allegations of asset diversion, characterizing these allegations as “misleading and mistaken.”

The attorneys pointed out a “complete disconnect” between the SEC’s “overbroad and abusive approach” and the limited expedited discovery framework to which the SEC had previously agreed in the consent order.

BAM’s response came shortly after both the SEC and Binance reached an agreement on a protective motion.

This motion mandated the filing of confidential information under seal, with restricted access only to specific parties including the judge, attorneys, plaintiffs, and defendants.

This joint motion was submitted on September 11, ensuring the confidentiality of protected materials in the ongoing legal proceedings.

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The United States Securities and Exchange Commission (SEC) has submitted a filing, urging the court to grant its motion to appeal a ruling from the Ripple Labs lawsuit that deemed the XRP token to not be a security when sold to retail investors.

The agency argues that “knotty legal problems” surrounding the court’s application of the law, specifically the Howey test, warrant a review.

In a filing dated September 8, the SEC calls for the U.S. District Court for the Southern District of New York to grant its motion for interlocutory appeal and “stay further proceedings until the resolution of that appeal,” citing the “knotty legal problems” raised by the court’s summary judgment order.

Judge Analisa Torres ruled in July that XRP is generally not a security under SEC guidelines, particularly when distributed via programmatic sales, such as being sold to retail investors through exchanges.

In its latest filing, the SEC argues that the rulings on programmatic sales and other distributions present significant “legal questions” justifying approval of the agency’s interlocutory appeal.

The SEC suggests that the legal ambiguity arises from whether certain crypto assets fall under the classification of investment contracts via the Howey test, citing differing opinions within the district and other courts considering similar issues.

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The SEC states that while interlocutory appeal should be the exception, this case is exceptional due to its industry-wide significance and special consequence, inviting interlocutory appeal.

These sentiments contradict previous statements from the SEC and its Chair, Gary Gensler, who has previously opposed the need for new crypto regulation, asserting that the SEC’s existing guidelines adequately cover the crypto market, including the notion that most crypto assets on the market are securities.

In a September 8 tweet, Ripple’s chief legal officer Stuart Alderoty calls the SEC’s filing “hypocritical” in light of Gensler’s prior statements about clear rules.

Coinbase’s chief legal officer, Paul Grewal, also questions how crypto firms can have “fair notice” if unresolved legal questions persist in court.

The SEC originally moved to appeal and stay Judge Torres’s decision in August, arguing substantial differences of opinion.

On September 1, Ripple Labs responded with a memorandum of law opposing the SEC’s appeal, contending that the agency lacks substantial grounds for the requested appeal.

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Nasdaq received approval from the United States Securities and Exchange Commission on September 8 to launch the first AI-driven exchange order type.

This innovative system, known as the dynamic midpoint extended life order (M-ELO), builds upon the existing M-ELO automated order type by incorporating real-time artificial intelligence (AI) capabilities, allowing it to continuously adjust and recalibrate itself.

Order types involve sets of software instructions that execute specific trade pairs at precise market pricing thresholds.

While automation of this kind has been in use for some time, the introduction of AI-driven order types marks a groundbreaking development, employing real-time reinforcement learning AI for order execution.

This advancement is expected to significantly accelerate order processing within the system.

Nasdaq revealed in a blog post that during research and testing, dynamic M-ELO achieved a remarkable “20.3% increase in fill rates and an 11.4% reduction in mark-outs.”

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Operating on a symbol-by-symbol basis, this new functionality continuously analyzes over 140 data points every 30 seconds to detect market conditions and optimize the holding period for trade execution eligibility.

This dynamic approach, in contrast to the traditional system’s static timeouts, should enhance fill rates without causing notable market impact.

The integration of artificial intelligence technologies in the fintech sector has had a profound impact on the entire financial industry.

Large language models like ChatGPT have found applications as educational tools for both traditional stock and cryptocurrency traders.

Nasdaq’s prior ventures into combining AI with finance included incorporating predictive AI models to assist in processing the vast array of over 1.5 million options listings in the U.S. market.

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On September 8, United States Representative Tom Emmer, the Majority Whip of the U.S. House of Representatives, sponsored an appropriations amendment aimed at restricting the U.S. Securities Exchange Commission’s (SEC) use of funds for digital asset enforcement.

Emmer, a vocal critic of the SEC’s actions in the cryptocurrency industry, particularly the leadership of SEC Chair Gary Gensler, alleged that Gensler had exceeded his authority, resulting in adverse consequences for the American people.

Emmer urged Congress to employ available methods and proper procedures to prevent potential misuse of taxpayer funds by Gensler and the SEC.

Emmer’s history includes co-sponsoring several bills designed to improve regulatory transparency within the United States.

He asserted that Gary Gensler had abused his authority to expand the Administrative State, to the detriment of the American people, emphasizing the necessity for Congress to employ all available tools, including the appropriations process, to restrain Gensler from further leveraging taxpayer dollars.

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The appropriations amendment Emmer introduced will limit the SEC’s use of funds for digital asset enforcement until comprehensive rules and regulations are established.

Concerns have arisen due to the absence of cryptocurrency regulations, with Emmer suggesting that the SEC’s substantial expenditures on legal disputes with numerous crypto entities might constitute a “weaponization” of taxpayer funds.

In a separate legislative move, Emmer introduced the Blockchain Regulatory Certainty Act, which clarifies that blockchain developers and service providers should not be classified as money transmitters, as they do not hold consumer funds in custody.

This distinction is intended to relieve non-custody providers from unnecessary compliance burdens that could hinder innovation in the United States, ensuring that validators, miners, and other noncustodial service providers are not grouped together with custody providers.

Prominent figures in the blockchain sector, including Blockchain Association CEO Kristin Smith and Crypto Council CEO Sheila Warren, voiced their support for Emmer’s proposed legislation.

Additionally, Emmer threw his support behind Representative Warren Davidson’s SEC Stabilization Act, which aims to remove Gary Gensler from his position as SEC chair.

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Story Protocol, a groundbreaking blockchain-based IP ownership network, has successfully closed a significant funding round, securing $54 million in investments as of September 7th.

Notably, this round saw participation from prominent figures in the industry, including 11:11 Media, owned by Paris Hilton, and the renowned venture capital firm Andreessen Horowitz, often referred to as a16z.

Story Protocol leverages the power of blockchain technology to offer content creators an effective means of managing and monetizing their creations in the face of ever-increasing AI-generated fakes.

Its primary mission is to establish itself as a robust blockchain-based repository for intellectual property ownership across various content formats, encompassing text, images, and audio.

For artists who choose to register on the platform, an array of interconnected services will be at their disposal, enabling them to license their content for diverse purposes.

Seung-yoon Lee, another co-founder of Story Protocol, anticipates a surge in remixed content generated by AI in the near future, emphasizing the pressing need for transparent provenance tracking and fair attribution—a challenge that blockchain technology is uniquely positioned to address.

The funding round was spearheaded by Andreessen Horowitz, which not only provided financial backing but also secured equity in Story Protocol, along with the option to purchase digital tokens should they be issued by the company, as confirmed by a company spokesperson.

Story Protocol also garnered support from prominent entities like Hashed, Endeavor, Samsung Next, and David Bonderman, the founder of TPG Capital.

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Jashon Zhao, co-founder of the company, outlined their plans to utilize these funds for the anticipated launch slated for the first half of 2024.

In the ever-evolving landscape of the entertainment industry, combating deep fakes and copyright infringements facilitated by generative AI has become a paramount concern. Universal Music Group (UMG) has taken a proactive stance, urging streaming platforms like Spotify to be vigilant in removing content that infringes on copyrighted work.

Following this call to action, Spotify promptly ramped up its content policing efforts, actively purging any material that violated copyright regulations.

Furthermore, recent reports have unveiled negotiations between UMG and Google concerning the management of deep fakes and the optimal licensing framework for melodies and vocal tracks that can be harnessed in AI-generated compositions.

This ongoing battle underscores the critical role that platforms like Story Protocol play in safeguarding intellectual property and ensuring fair compensation for creators in a rapidly evolving digital landscape.

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Ripple’s legal representatives, amidst the ongoing legal battle with the United States Securities and Exchange Commission (SEC), have put forth a contention suggesting that the regulatory body lacks the necessary grounds to pursue an appeal.

The legal team for Ripple filed a document on September 1 with the U.S. District Court for the Southern District of New York, asserting that the SEC’s motivation for seeking an appeal predominantly stems from dissatisfaction with a judge’s prior decision.

This decision had ruled that the XRP token did not meet the criteria to be classified as a security in relation to sales directed at retail investors.

Ripple’s lawyers emphasized that the requisites for an “interlocutory appeal,” which demands exceptional circumstances, are conspicuously absent in this particular case.

The legal representatives urged the presiding judge to dismiss any request for an appeal or a stay based on these grounds.

In unity with the Individual Defendants, who are also part of the lawsuit, Ripple vociferously opposed the SEC’s appeal request.

This development follows a sequence of events where the SEC attempted to contest and postpone a July ruling by Judge Analisa Torres.

The July decision concluded that XRP did not primarily qualify as a security as outlined by the SEC’s guidelines.

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The regulatory agency had then asserted that substantial differences of opinion on the relevant laws justified their pursuit of an appeal.

The lawsuit, initially initiated by the SEC against Ripple, CEO Brad Garlinghouse, and co-founder Chris Larsen in December 2020, led to a wave of delistings of the XRP token from various exchanges.

However, Judge Torres’ subsequent ruling prompted some of these exchanges to consider relisting the token in light of the evolving legal situation.

Brad Garlinghouse expressed disappointment with the need for legal action to rectify what he perceives as the SEC’s flawed understanding of facts and regulations within the U.S. cryptocurrency community.

Throughout 2023, the SEC has been actively pursuing various cryptocurrency entities for alleged securities violations, including prominent platforms like Binance and Coinbase.

In a recent victory for the cryptocurrency industry, asset management firm Grayscale achieved success in court against the SEC.

An appeal prompted the court to mandate a review of Grayscale’s application for a Bitcoin exchange-traded fund (ETF).

As the legal proceedings between the SEC and Ripple continue, Judge Torres has proposed a jury trial slated to commence in the second quarter of 2024.

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