On August 28, the US Securities and Exchange Commission (SEC) filed a sealed motion for leave to file documents under seal in its ongoing case against Binance. Following this, former SEC attorney John Reed Stark has revealed what this could mean for the world’s largest crypto exchange by trading volume.

An Impending Criminal Case Against Binance?

In a tweet released on his X (formerly Twitter) platform, Stark stated that the SEC may have chosen to seal those documents because they do not want to interfere or reveal a “criminal investigation or prosecution conducted” by the US Department of Justice (DOJ). 

He noted that there could be reason to keep this confidential, especially if the DOJ had already convened a grand jury for the impending criminal, as this information is considered “secret” by the Federal Rule of Criminal Procedure.

Concerning the investigation, the SEC may also be looking to keep these documents under seal, especially if the DOJ is working with confidential informants or whistleblowers whose information must be kept secret so as not to jeopardize the investigation.

Filing a document under seal ensures it isn’t available to the public. However, the court’s approval is needed, considering that court documents are meant to be generally available to the public.  That is why the Commission filed a motion to seek leave of the court to file these documents. 

The SEC filed multiple exhibits, a proposed order, and a declaration of SEC trial attorney Jennifer Farer, along with the motion. In Stark’s opinion, the SEC’s sealed document “likely touches” on the “nonpublic Binance-related money laundering allegations or other potential criminal conduct.” 

If so, the SEC might be doing this to discredit the crypto exchange and prove that they are capable of the allegations the regulator has leveled against them.

In June, the SEC filed a lawsuit against Binance and its CEO, Changpeng “CZ” Zhao, for securities fraud. The Commission alleges that Binance has been operating as an unregistered securities exchange. Binance is also accused of mishandling customer funds and lying to regulators and investors about its operations. 

Another Plausible Option

Stark further stated that the SEC may have also sealed the documents just to protect the identity of its witness or a company. However, in this case, the usual thing to do is redact some statements rather than a full-court sealing.

He noted that if Binance were to oppose the SEC’s motion, then it likely means that the SEC is simply trying to keep the “identity of a witness secret,” something which Binance would prefer to be revealed.

However, he predicts that the crypto exchange will not oppose the SEC’s motion for fear that the DOJ is likely building a criminal case against it. Binance won’t want to make any statement that could serve as evidence or criticize the criminal allegations relating to the company’s operations. 

Binance’s CEO Chanpeng “CZ” Zhao, known for putting out statements to rebut any fud, has yet to comment regarding the SEC’s recent action.