SECURITIES AND EXCHANGE COMMISSION v. BINANCE HOLDINGS LIMITED et al Document 95: Motion for Protective Order

District Of Columbia District Court
Case No. 1:23-cv-01599-ABJ-ZMF
Filed August 14, 2023

MOTION for Protective Order by BAM MANAGEMENT US HOLDINGS INC., BAM TRADING SERVICES INC.. (Attachments: # (1) Declaration of Matthew J. Laroche, # (2) Exhibit 1, # (3) Exhibit 2, # (4) Exhibit 3, # (5) Exhibit 4, # (6) Exhibit 5, # (7) Exhibit 6, # (8) Exhibit 7, # (9) Exhibit 8, # (10) Exhibit 9, # (11) Text of Proposed Order)(Canellos, George)

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Page 1 UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
v.
No. 1:23-cv-01599 (ABJ)
BINANCE HOLDINGS LIMITED,
BAM TRADING SERVICES INC.,
BAM MANAGEMENT US HOLDINGS INC.,
AND CHANGPENG ZHAO,
Defendants.
DEFENDANTS BAM TRADING SERVICES INC. AND BAM MANAGEMENT US
HOLDINGS INC.’S MOTION FOR A PROTECTIVE ORDER
Defendants BAM Trading Services Inc. and BAM Management US Holdings Inc.
(together, “BAM”) respectfully request that the Court enter the proposed order attached hereto.
The grounds for this motion are further set forth in the supporting memorandum, dated August 14,
2023. Counsel for BAM have conferred with counsel for Plaintiff Securities and Exchange
Commission and understands that they oppose this motion.
Page 2 Dated: August 14,
Respectfully submitted,
/s/ Matthew T. Martens
William R. McLucas (pro hac vice)
Matthew T. Martens (D.C. Bar #1019099)
Matthew Beville (pro hac vice)
WILMER CUTLER PICKERING HALE
AND DORR LLP
2100 Pennsylvania Avenue NW
Washington, DC William.McLucas@wilmerhale.com
Matthew.Beville@wilmerhale.com
Matthew.Martens@wilmerhale.com
/s/ George S. Canellos
George S. Canellos (pro hac vice)
Matthew J. Laroche (pro hac vice)
MILBANK LLP
55 Hudson Yards
New York, NY GCanellos@milbank.com
MLaroche@milbank.com
__________________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ _____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ __
Tiffany J. Smith (pro hac vice)
WILMER CUTLER PICKERING HALE
AND DORR LLP
7 World Trade Center
250 Greenwich Street
New York, NY Tiffany.Smith@wilmerhale.com
Attorneys for Defendants BAM Trading
Services Inc. and BAM Management
Holdings US Inc.
__________________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ _____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ __
Attorneys for Defendants BAM Trading Services
Inc. and BAM Management Holdings US Inc.
Page 3 UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SECURITIES AND EXCHANGE COMMISSION,
Plaintiff,
v.
No. 1:23-cv-01599 (ABJ)
BINANCE HOLDINGS LIMITED,
BAM TRADING SERVICES INC.,
BAM MANAGEMENT US HOLDINGS INC.,
AND CHANGPENG ZHAO,
Defendants.
MEMORANDUM OF LAW IN SUPPORT OF DEFENDANTS BAM TRADING
SERVICES INC. AND BAM MANAGEMENT US HOLDINGS INC.’S
MOTION FOR A PROTECTIVE ORDER
Page 4 TABLE OF CONTENTS
PRELIMINARY STATEMENT .................................................................................................BACKGROUND ........................................................................................................................

BAM Worked in Good Faith to Respond to the SEC’s Expedited Discovery
Requests ..............................................................................................................
B.
BAM Has Provided the SEC with an Immense Amount of Information
About Customer Assets ........................................................................................
C.
The SEC Continues to Seek Discovery Far Beyond the Scope of the Consent
Order ...................................................................................................................
ARGUMENT ........................................................................................................................
I.
THE COURT SHOULD GRANT BAM’S MOTION FOR A PROTECTIVE
ORDER
A.
The SEC’s Requests for All Communications from Noticed Deponents
Goes Far Beyond the Scope of the Consent Order ..............................................
B.
The SEC Should Not Be Permitted to Depose BAM’s CEO and CFO ................
C.
1.
BAM’s CEO and CFO Do Not Have Unique Firsthand Knowledge
that is Relevant to this Action .................................................................
2.
Less Intrusive Discovery is Readily Available, including
Documentary Evidence and Testimony From Persons Who are
Directly Responsible for the Custody, Security, and Transfer of
Customer Assets .....................................................................................
The SEC’s Discovery Demands are an Inappropriate Fishing Expedition ...........
CONCLUSION

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Page 5 TABLE OF AUTHORITIES
Page(s)
Cases
Affinity Labs of Tex. v. Apple, Inc.,
2011 WL 1753982 (N.D. Cal. May 9, 2011) ............................................................ 15, 18, In re Application for an Ord. Pursuant to 28 U.S.C. § 1782,
473 F. App’x 2 (D.C. Cir. 2012) .......................................................................................... Alexander v. Fed. Bureau of Investigation,
1998 WL 1048978 (D.D.C. Mar. 2, 1998) ........................................................................... Am. Fed. of State, Cnty. and Mun. Emps., AFL-CIO v. Project Veritas Action
Fund,
2022 WL 3655277 (D.D.C. Aug. 25, 2022) ......................................................................... *Celerity, Inc. v. Ultra Clean Holding, Inc.,
2007 WL 205067 (N.D. Cal. Jan. 25, 2007) ................................................................... 15, Concord Boat Corp. v. Brunswick Corp.,
169 F.R.D. 44 (S.D.N.Y. 1996) ........................................................................................... Darjee v. Betlach,
2018 WL 11352595 (D. Ariz. Feb. 14, 2018)....................................................................... *Diamond Servs. Mgmt. Co., LLC v. Knobbe, Martens, Olson & Bear, LLP,
339 F.R.D. 334 (D.D.C. 2021) ....................................................................................... 10, Gen. Star Indem. Co. v. Platinum Indem. Ltd.,
210 F.R.D. 80 (S.D.N.Y. 2002) ........................................................................................... Hallmark Licensing LLC v. Dickens Inc.,
2018 WL 6573435 (E.D.N.Y. Dec. 13 2018) ....................................................................... Hardrick v. Legal Servs. Corp.,
96 F.R.D. 617 (D.D.C. 1983)............................................................................................... Menashe v. Covington & Burling LLP,
552 F. Supp. 3d 35 (D.D.C. 2021) ................................................................................. 12, Nike, Inc. v. Wu,
2020 WL 257475 (S.D.N.Y. Jan. 17, 2020) ......................................................................... In re Non-Party Subpoena to Ctr. for Study of Soc. Pol’y,
2023 WL 2467738 (D.D.C. Mar. 7, 2023) ...........................................................................
-ii-
Page 6 Pederson v. Preston,
250 F.R.D. 61 (D.D.C. 2008)............................................................................................... *Pietrangelo v. Refresh Club, Inc.,
2022 WL 4245486 (D.D.C. Sept. 15, 2022) ............................................................. 10, 11, Regail Brand All., Inc. v. Factory Mut. Ins. Co.,
2008 WL 622810 (S.D.N.Y. Mar. 7, 2008) .......................................................................... Reif v. CNA,
248 F.R.D. 448 (E.D. Pa. 2008) ........................................................................................... Rodriguez v. SLM Corp.,
2010 WL 1286989 (D. Conn. Mar. 26, 2010) ...................................................................... In re Ski Train Fire of Nov. 11, 2000 Kaprun Austria,
2006 WL 1328259 (S.D.N.Y. May 16, 2006) ...................................................................... Treppel v. Biovail Corp.,
2006 WL 468314 (S.D.N.Y. Feb. 28, 2006)......................................................................... United States v. All Assets Held at Bank Julius Baer & Co, Ltd.,
202 F. Supp. 3d 1 (D.D.C. 2016) ......................................................................................... United States v. Newman,
531 F. Supp. 3d 181 (D.D.C. 2021) ..................................................................................... Wall v. Reliance Standard Life Ins. Co.,
341 F.R.D. 1 (D.D.C. 2022)........................................................................................... 11, Wilson v. DNC Servs. Corp.,
831 F. App’x 513 (D.C. Cir. 2020) ...................................................................................... Other Authorities
Fed. R. Civ. P. 26(b)(1). ............................................................................................................ Fed. R. Civ. P. 26(b)(2)(C)(i). ................................................................................................... Fed. R. Civ. P. 26(c)(1) .............................................................................................................
-iii-
Page 7 PRELIMINARY STATEMENT
Defendants BAM Trading Services Inc. (“BAM Trading”) and BAM Management US
Holdings Inc. (“BAM Management,” collectively with BAM Trading, “BAM”), respectfully
submit this memorandum in support of BAM’s motion for a protective order concerning deposition
notices and discovery requests made by Plaintiff Securities and Exchange Commission (“SEC”)
in connection with the “limited expedited discovery” authorized by the Consent Order. Dkt. 71.
Specifically, the SEC is demanding that BAM (i) produce “all communications” concerning
dozens of topics—many of which have nothing to do with customer assets—from at least six
employees and executives dating back to November 2022; and (ii) make at least six of its
employees and officers available for depositions (including its CEO and CFO). BAM has offered
four witnesses for depositions, including the two best positioned to address questions about the
custody and security of customer assets, and is willing to conduct targeted searches for
communications on relevant issues on the condition that the SEC identify specific issues that it
believes merit discovery of electronic communications.
The SEC has declined BAM’s proposals or to meaningfully limit its requests. The SEC’s
position is unreasonable and part of a broader pattern of the SEC abusing the discovery provision
of the Consent Order. The Consent Order authorized “limited expedited discovery” on a narrow
set of topics—namely, the custody, security, and availability of BAM customer assets. Instead of
seeking “limited” discovery, the SEC has spent the past 45 days serving incredibly overbroad and
unreasonable discovery requests that seek, on their face, every single document in BAM’s
possession related to customer assets. BAM has worked in good faith, but the SEC has been
steadfast in its belief that the Consent Order gives it carte blanche to investigate every aspect of
BAM’s asset custody practices without any discernible limitation whatsoever. Now, the SEC is
also demanding depositions of BAM’s most senior executives despite that they do not have unique
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Page 8 firsthand knowledge about the facts surrounding the security, custody, and transfer of customer
assets, and the employees who do have been offered for depositions.
At bottom, the SEC is conducting a fishing expedition instead of seeking the narrow and
“limited” discovery authorized by the Consent Order to ensure customer assets are presently secure
and available. The SEC’s approach is especially troubling and inappropriate given that: (i) BAM’s
asset custody practices have nothing to do with the underlying claims in this case; (ii) BAM has
taken numerous steps pursuant to the Consent Order to further ensure that customer assets are
secure; (iii) BAM has already produced an immense amount of information about customer assets
to the SEC; and (iv) the SEC still has not identified the slightest evidence that BAM customer
assets have been misused or mishandled in any way.
For these reasons, as further outlined below, the Court should issue a protective order
limiting the SEC to four depositions of BAM employees, precluding the SEC from questioning
witnesses during depositions on matters outside the scope of the Consent Order, precluding
depositions of BAM’s CEO and CFO, and precluding requests for all communications about
various topics.
BACKGROUND
A.
BAM Worked in Good Faith to Respond to the SEC’s Expedited Discovery
Requests
On June 17, 2023, the Court entered a Consent Order that required BAM to take numerous
actions, such as repatriating all customer assets to the United States and providing a substantial
amount of information to the SEC concerning customer assets, including a verified accounting.
Dkt. 71. The Consent Order also permitted the SEC to conduct “limited expedited discovery” for
a period of 90 days on a narrow set of topics—namely, the possession, custody, and control of
BAM customer assets, including whether BAM can meet customer claims and liabilities. Id. at 8-2-
Page 9 10. Shortly after the Consent Order was entered, the Court entered a separate scheduling order
providing, among other things, that in light of the expedited discovery provision of the Consent
Order and anticipated dispositive motion practice, the Court was “declin[ing] to establish a
schedule for merits discovery . . . until the [dispositive] motions have been resolved.” Dkt. 88.
The Consent Order was agreed to by the parties in the wake of the SEC’s motion for a
temporary restraining order seeking to freeze all of BAM’s assets without any exceptions. BAM
strongly disagreed that there was any basis for such draconian relief because, among many other
reasons, the SEC lacked any evidence (after years of investigation) suggesting that BAM customer
assets were not secure, appropriately segregated, or available to customers. Dkt. 40 (“BAM Opp.
Br.”) at 3, 11-15. Indeed, during the TRO hearing, the SEC acknowledged that it had no evidence
that BAM customer assets have been dissipated, commingled, or misused in any way. Dkt. 74-(June 13, 2023 Hearing Tr.) 33:1-6; 44:22-45:9. The SEC made this admission despite that it had
conducted a years-long investigation during which BAM produced hundreds of thousands of
documents and provided substantial information concerning virtually every aspect of BAM’s
business. BAM Opp. Br. at 7-9.
After the Consent Order was entered, BAM proposed that the SEC either interview or
depose Sara Sisenwein, BAM’s Senior Director of Treasury Operations, and/or Erik Kellogg,
BAM’s Chief Information Security Officer. Ms. Sisenwein and Mr. Kellogg submitted detailed
declarations related to the custody and security of customer assets in support of BAM’s opposition
to the TRO (Dkt. 42 and 44) and have extensive firsthand knowledge of those issues. BAM
-3-
Page 10 explained that meeting with those individuals might assuage the SEC’s concerns or otherwise help
to narrow the SEC’s discovery requests. Laroche Decl. ¶ 4.Instead of taking advantage of those interviews, on June 23, 2023, the SEC served requests for production (“RFPs”) and 24 interrogatories (“Interrogatories”) that sought, in essence,
every document and communication concerning customer assets, among many other topics, in
BAM’s possession dating back to November 2022. Id. ¶ 5; Exs. 1 and 3. The SEC’s discovery
requests are plainly inappropriate. Twenty-seven of the RFPs sought “All Documents and
Communications Concerning” various topics and many other requests contained similarly
overbroad language such as seeking “a complete record of the BAM Entities’ financial statements
and transactions.” For example, (i) RFP No. 2 sought “All Documents and Communications
Concerning the deposit, custody, control, storage, transfer, movement, withdrawal, security,
segregation, and availability of Customer Assets,” which on its face sought virtually any
conceivable document related to customer assets; and (ii) RFP No. 26 sought “All Documents and
Communications Concerning any internal or external audits,” which encompasses topics far
beyond the security and custody of customer assets.
As BAM explained to the SEC during meet and confers, in letters, and in its responses and
objections to the RFPs and Interrogatories, the SEC’s requests sought information far beyond the
scope of the Consent Order and what was necessary to assess the custody and security of Customer
Assets. Id. ¶¶ 3, 7; Ex. 5 and 8. Responding to those requests would have been extremely
burdensome and virtually impossible on a typical discovery timeframe, let alone the timeframes

“Laroche Decl.” refers to the Declaration of Matthew Laroche submitted in further support
of BAM’s motion, and “Ex.” refers to the exhibits thereto.
-4-
Page 11 set forth in the Consent Order. Moreover, many of the RFPs and Interrogatories are duplicative in
that they seek the same information and/or information that was already produced to the SEC.
Regardless, BAM worked in good faith to respond to the SEC’s requests. On July 5, 2023,
BAM sent the SEC a letter proposing a detailed discovery plan to address what BAM understood
to be the SEC’s primary concern—ensuring that Customer Assets are presently secure, in BAM’s
control, and available to meet customer claims and liabilities. Ex. 5. Since that time, BAM has
diligently collected documents and information, made numerous productions, submitted a sworn
accounting, offered four witnesses for depositions, and provided a substantial amount of additional
information through letters, interrogatory responses, and declarations. See Background, Part B.
BAM also repeatedly met with the SEC to discuss its discovery plan and to address followup requests. Id. ¶ 3. When the SEC raised specific issues during meet and confers, BAM worked
diligently to address them. For example, during a meet and confer on July 24, 2023, the SEC made
numerous requests on various issues, which BAM responded to in a detailed letter, dated July 31,
2023, and accompanying productions. Ex. 8. However, when BAM requested that the SEC
consider limiting its requests, the SEC declined to do so and continued to take the position that
BAM is required to produce “All Documents and Communications Concerning” various topics.
Id. Exs. 7 and 8. The SEC appears to maintain that position to this day. Ex. 9.
B.
BAM Has Provided the SEC with an Immense Amount of Information About
Customer Assets
BAM has already provided the SEC with documents and information that is more than
sufficient to assess the custody and security of customer assets. As of this filing, BAM has made
almost a dozen productions encompassing over 200 documents totaling over 5,000 pages, provided
narrative responses to Interrogatories, and submitted several letters with detailed information
concerning customer assets. Laroche Decl. ¶ 13; Ex. 8. BAM provided these documents and
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Page 12 information pursuant to the Consent Order, in response to the RFPs and Interrogatories, and in
response to numerous follow-up requests by the SEC. Id. These responses supplemented the
extensive information that BAM had previously provided on these topics in the days and weeks
preceding the filing of this action.
To summarize, during expedited discovery, BAM has provided documents and information
on a variety of topics, including but not limited to:
•
Policies and Procedures Related to BAM Customer Assets: BAM produced
numerous policies concerning customer assets and provided narrative responses to
the SEC’s follow-up questions concerning those policies. BAM also provided
updates to the Sisenwein and Kellogg Declarations as necessary to reflect changes
to BAM’s asset custody practices following the Consent Order.
•
Customer Accounts: BAM produced documents reflecting all accounts and wallets
holding customer assets and assets of BAM, as well as the value of those assets.
This included documents reflecting (i) a preliminary list of hot and cold omnibus
wallets holding customer and BAM digital assets supported by BAM’s platform,
as well as the amount of digital assets in each wallet as of June 30, 2023 and the
value of those assets in USD; (ii) a preliminary list of digital assets for which BAM
maintains deposit wallets holding customer digital assets, the number of deposit
wallets for each type of digital asset, and the aggregate amount of each type of
digital asset in the deposit wallets as of June 30, 2023; (iii) the amount of customer
and BAM digital assets in staking wallets custodied by BAM or its U.S.-based
third-party custody providers as of June 30, 2023; and (iv) BAM’s fiat bank
accounts that hold BAM and customer fiat currency as well as their balances in
USD as of June 30, 2023.
•
Customer Account Balances: BAM produced extensive data from BAM’s internal
ledger system (“PNK”), including documents reflecting: (i) the amount of fiat and
digital assets held by BAM customers in their respective accounts and/or wallets as
of June 30, 2023 as well as the USD value for each of the digital assets; and (ii) the
amount of fiat and digital assets held by BAM on its trading platform as of June 20,
2023 as well as the USD value for each of the digital assets.
•
PNK Lookback: In response to follow-up requests by the SEC, BAM produced
historical information from PNK, including the aggregate amount of assets within
each digital asset on a weekly basis since January 2023. BAM provided this
information so the SEC could assess whether BAM maintained sufficient assets to
meet customer claims and liabilities since the beginning of 2023 (which it did).
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Page 13 •
Bank and Payment Processors: BAM produced documents related to BAM’s
banking partners and payment processors, including account opening documents
and bank statements. BAM also searched for and produced any communications
with its bank and payment processors reflecting any encumbrances or limitations
put on BAM customer accounts in light of this action.
•
Personnel with Roles Concerning Customer Assets: BAM identified personnel
who presently have a role or responsibility concerning the possession, custody, or
control of Customer Assets, as well as their current job title, whether they have
been employed by the Binance Entities or Mr. Zhao, their current country of
residence, and whether they have a role under BAM’s Digital Asset & Custody
Operations Policy.
•
Personnel Generally: BAM separately identified all of its officers, employees, and
contractors as of the date of the complaint, their job title, whether they have been
employed by the Binance Entities or Mr. Zhao, and the BAM Division within which
they work.
•
Private and Administrative Keys: BAM identified employees who previously had
custody of the Private and Administrative Keys, as well as the individuals who have
custody of the New Private and Administrative Keys, their current BAM job title,
whether they have been employed by the Binance Entities or Mr. Zhao, and their
current country of residence.
•
Whitelisted Wallets: BAM identified all whitelisted digital asset wallets and
described the whitelisting process.
•
Ordinary Course Business Expenses: BAM produced a summary of its Ordinary
Course Business Expenses including the total amount spent, a breakdown of the
amounts in each category and subcategory enumerated, and any amounts
aggregating in excess of $150,000 to foreign payees.
•
Verified Accounting: BAM produced an accounting, verified by BAM’s Chief
Legal Officer, reflecting the assets currently held by or on behalf of BAM and a list
of all transfers of any assets by BAM to the Binance Entities valued at greater than
$1,000 since December 2022. This included: (i) a verified list of hot and cold
omnibus wallets holding customer and BAM digital assets supported by BAM’s
trading platform, as well as the amount of digital assets in each wallet as of June
30, 2023 and the value of those assets in USD; (ii) a final list of digital assets for
which BAM maintains deposit wallets holding customer digital assets, the number
of deposit wallets for each type of digital asset, and the aggregate amount of each
type of digital asset in the deposit wallets as of June 30, 2023; (iii) a final
spreadsheet prepared by BAM that provides the balances of customer and BAM
digital assets available for staking via BAM’s staking service; (iv) a final list of
BAM’s fiat bank accounts that hold BAM and customer fiat currency as well as
their balances in USD as of June 30, 2023; (v) final spreadsheets prepared by BAM
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Page 14 that provide the amount of fiat and digital assets held by BAM customers in their
respective accounts and/or wallets as of June 30, 2023 as well as the USD value for
each of the digital assets; and (vi) a spreadsheet prepared by BAM of all “assets,
funds, crypto assets, securities, or other property, real or personal” valued greater
than $1,000 that was transferred to, or for the benefit of, any Defendant or any
Binance Entity from December 1, 2022 to the present.
•
Ceffu and Third-Party Custodians: BAM produced numerous documents related
to Ceffu and other third-party custodians and/or software providers. This included
(i) System and Organization Controls (“SOC”) reports, which examines how
companies secure and store digital assets; (ii) Information Security Management
(“ISO”) System certifications, which certifies a management system or service
meets requirements for standardization and quality assurance; and (iii) security
questionnaires, which BAM used to conduct diligence on third-party custodians
and software providers.
Laroche Decl. ¶¶ 13(a)-(l).
Pursuant to the Consent Order, BAM also agreed to take (and has taken) several other steps
to ensure the security of customer assets. This includes: (i) repatriating to the United States all fiat
currency and crypto customer assets and related hardware, such as Private and Administrative
Keys (Consent Order at 1-2); (ii) confirming that BAM would maintain custody and control of
Customer Assets during the pendency of this case and not transfer any assets to any Binance
Entities (id. at 2-4); and (iii) ensuring that all Private and Administrative Keys are in the possession
of BAM employees in the United States (id. at 5).
Moreover, by the time the Complaint was filed in this matter, the SEC already had an
enormous amount of documents and information concerning BAM’s asset custody practices.
BAM made significant efforts over more than three years to cooperate with the SEC’s investigation
in this matter. During that time, BAM produced more than 700,000 individual communications,
including approximately 11,391 emails, 8,196 email attachments, and 652,817 other messages.
BAM also prepared bespoke data (including years’ worth of revenue data) and dozens of pages of
narrative and interrogatory responses to the SEC’s requests and follow-up questions, detailing
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Page 15 virtually every aspect of its business. In the months before the Complaint was filed, the SEC began
to focus on the custody of BAM’s assets, and BAM continued to cooperate in good faith, working
around the clock to address the SEC’s questions. In addition to numerous telephone conversations,
BAM provided the SEC with detailed written responses to the SEC’s questions about BAM’s
customer assets in letters dated May 25, 2023, May 26, 2023, June 1, 2023, and June 2, 2023.
Despite possessing all this information, to this day, the SEC does not purport to possess
any evidence that BAM has misused customer assets in any way. Nor has the SEC raised any
questions concerning the verified accounting or any other data reflecting the custody or security
of customer assets. Indeed, beyond generalized “concerns” and unsubstantiated fears that persons
outside the United States could potentially exert influence over BAM personnel, the SEC has been
unable to articulate the basis for believing that BAM’s assets are even theoretically at risk.
C.
The SEC Continues to Seek Discovery Far Beyond the Scope of the Consent
Order
The SEC’s position is that the foregoing productions and information are insufficient to
confirm that customer assets are secure and available to customers. Two issues are the subject of
this motion:
First, the SEC believes that BAM must produce “all communications” involving at least
six witnesses concerning numerous topics. Laroche Decl. Ex. 9. As noted above, BAM’s position
is that requests for “All Documents and Communications” are inappropriate, unduly burdensome,
and well beyond the scope of the Federal Rules and Consent Order. BAM has repeatedly asked
the SEC to narrow its requests. The SEC has refused to do so other than to state that BAM may
limit its “all communications” productions to the witnesses noticed for depositions or otherwise
propose how to narrow the SEC’s requests. Id.
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Page 16 Second, on August 2, 2023, the SEC sent BAM deposition notices for 14 BAM employees
and officers. BAM responded that the SEC’s request violates the Federal Rules, which limits the
SEC to 10 depositions absent court order, and is beyond the scope of the Consent Order. Ex. 9.
BAM proposed that the SEC take the depositions of Mr. Kellogg and Ms. Sisenwein, the BAM
employees best positioned to answer the SEC’s questions about customer assets; the head of
BAM’s Asset Clearance Team; and one holder of a New Private and Administrative Key. The
SEC’s current position is that BAM must, at a minimum, make at least six witnesses available for
depositions, including BAM’s CEO and CFO. Id.
APPLICABLE LAW
“All discovery must be ‘relevant to any party’s claim or defense and proportional to the
needs of the case.’” Pietrangelo v. Refresh Club, Inc., 2022 WL 4245486, at *2 (D.D.C. Sept. 15,
2022) (quoting Fed. R. Civ. P. 26(b)(1)). Although “‘relevance’ for discovery purposes is broadly
construed,” the party seeking discovery has the burden of establishing relevance by making a
showing that the requested discovery will “have some probable effect on the organization and
presentation of the moving party’s case.” Id. (cleaned up). Moreover, “[d]iscovery is not intended
to be a fishing expedition, but rather is meant to allow the parties to flesh out allegations for which
they initially have at least a modicum of objective support.” Diamond Servs. Mgmt. Co., LLC v.
Knobbe, Martens, Olson & Bear, LLP, 339 F.R.D. 334, 340 (D.D.C. 2021).
Upon a showing of “good cause,” the Court may issue a protective order to protect the
party from whom discovery is sought “from annoyance, embarrassment, oppression, or undue
burden of expense.” Fed. R. Civ. P. 26(c)(1). “The court must restrict the extent of discovery
otherwise allowed if it determines that” the discovery sought (i) is unreasonably cumulative or
duplicative; (ii) can be obtained from some other source that is more convenient, less burdensome,
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Page 17 or less expensive; and/or (iii) is not proportional to the needs of the case, taking into account “the
importance of the issues at stake in the action, the amount in controversy, the parties’ relative
access to relevant information, the parties resources, the importance in resolving the issues, and
whether the burden or expense of the proposed discovery outweighs its likely benefit.”
Pietrangelo, 2022 WL 4245486, at *2 (first quote); Am. Fed. of State, Cnty. and Mun. Emps., AFLCIO v. Project Veritas Action Fund, 2022 WL 3655277, at *3 (D.D.C. Aug. 25, 2022) (second
quote).
ARGUMENT
I.
THE COURT SHOULD GRANT BAM’S MOTION FOR A PROTECTIVE ORDER
A.
The SEC’s Requests for All Communications from Noticed Deponents Goes
Far Beyond the Scope of the Consent Order
The SEC has not established that its requests for all communications involving at least six
witnesses are within the relevant scope of the Consent Order. Despite several requests, the SEC
has not explained why the production of those communications, which would cover numerous
topics well beyond customer assets and date back to November 2022, would be relevant to
assessing the current custody and security of customer assets, which is the core purpose of the
limited expedited discovery authorized by the Consent Order. See, e.g., Pietrangelo, 2022 WL
4245486, at *3-5 (denying various discovery requests on relevance grounds where they sought
information having no relation to plaintiff’s claim and/or plaintiff had not satisfied his “initial
burden of explaining how the requested information is relevant”); Wall v. Reliance Standard Life
Ins. Co., 341 F.R.D. 1, 6 (D.D.C. 2022) (similar). Given the breadth of the SEC’s requests, BAM
is also concerned that the SEC is seeking merits discovery in contravention of the Court’s
scheduling order. Dkt. 88.
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Page 18 Even if the SEC could show that its requests sought relevant material, they are plainly
overbroad and unduly burdensome.
The SEC’s position that BAM must produce all
communications as set forth in the RFPs is breathtaking given that 27 RFPs request “all
communications” concerning at least dozens of topics, many of which are not limited to matters
concerning customer assets. Laroche Decl. Ex. 3 (listing RFP requests for “All Documents and
Communications Concerning” numerous topics). It is well settled that document requests seeking
“virtually every document” in a party’s possession on a topic are “overbroad on their face and
exceed the bounds of fair discovery.” In re Non-Party Subpoena to Ctr. for Study of Soc. Pol’y,
2023 WL 2467738, at *4 (D.D.C. Mar. 7, 2023); see also Menashe v. Covington & Burling LLP,
552 F. Supp. 3d 35, 45 (D.D.C. 2021) (request that “asks for essentially every document
[Covington] possesses relating to its representation of [Nest Affiliates] all over the world is overly
broad and burdensome” (cleaned up)); United States v. All Assets Held at Bank Julius Baer & Co,
Ltd., 202 F. Supp. 3d 1, 4-5 (D.D.C. 2016) (request to search for and produce “all” communications
about a topic “would be ‘very time-consuming, extremely burdensome, and unlikely to lead to the
discovery of admissible, probative evidence’”); Concord Boat Corp. v. Brunswick Corp., F.R.D. 44, 50-51 (S.D.N.Y. 1996) (holding that subpoena that sought discovery of “virtually every
document” relating to the defendant that was generated or maintained by a non-party witness
during the past ten years was overbroad and had to be quashed or modified).
The SEC has refused to meaningfully limit the burden of its requests. For example, during
meet and confers, BAM stated that it would be open to considering more tailored requests for
documents and communications related to audits and the SEC stated that it would propose more
narrow requests. However, the SEC ultimately refused to narrow those requests and instead
maintained that BAM was required to produce “all documents and communications” concerning
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Page 19 audits dating back to November 2022. Ex. 8. Similarly, as to communications involving
deponents, BAM stated that it was open to conducting narrow searches for communications
concerning pertinent issues.
The SEC responded that BAM should simply produce “all”
communications concerning Customer Assets for the proposed deponents as limited by the subject
matter of the RFPs. Ex. 9. As detailed above, the RFPs have no limit at all and purport to require
BAM to produce every communication in its possession concerning customer assets and numerous
other topics.
Moreover, BAM should not be forced to propose how to limit the SEC’s requests for
communications, as the SEC has asked BAM to do. Ex. 9. BAM has already proposed a detailed
discovery plan that addresses issues pertinent to the Consent Order. BAM does not understand
(and the SEC has not explained) why it also needs communications to assess the custody and
security of customer assets, which leaves BAM guessing as to what subset of communications
about customer assets would satisfy the SEC’s requests. BAM is not obligated to narrow discovery
requests that are overbroad and unduly burdensome on their face. See, e.g., In re Application for
an Ord. Pursuant to 28 U.S.C. § 1782, 473 F. App’x 2, 4 (D.C. Cir. 2012) (“[T]he district court
had no obligation to trim [a party’s] discovery request after it determined it was overbroad and
vague.”); Menashe, 552 F. Supp. 3d at 45 (same).
Finally, the SEC’s request is not proportional to the needs of the case. The underlying
claims in this case have nothing to do with BAM’s asset custody practices. Rather, the SEC sought
a temporary restraining order based on its unfounded concern that customer assets could be
dissipated. The Consent Order authorized the SEC to conduct “limited expedited discovery” to
assuage that concern, and BAM has produced ample information showing that customer assets are
secure and available to meet customer claims or liabilities. BAM has also taken numerous steps
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Page 20 under the Consent Order to further ensure the security of customer assets. There is simply no basis
to require BAM to produce a substantial number of communications to further address whatever
unsubstantiated concerns the SEC still holds about BAM. Moreover, complying with the SEC’s
requests would likely take months or longer and come with significant and unwarranted expense.
See Pietrangelo, 2022 WL 4245486, at *2; see also Wall, 341 F.R.D. at 6 (“[E]ven if the RFP did
seek relevant information, the sheer volume of potentially responsive documents renders it unduly
burdensome and not proportional to the needs of this case.”); Darjee v. Betlach, 2018 WL
11352595, at *3–4 (D. Ariz. Feb. 14, 2018) (denying a motion to compel and finding that the
requested discovery was not “proportional to the needs of this case” where the non-moving party
contended “that it would take thousands of hours to retrieve much of the sought after
information”); Nike, Inc. v. Wu, 2020 WL 257475, at *12 (S.D.N.Y. Jan. 17, 2020) (“Negotiating
search terms, identifying email custodians, and weeding out non-responsive emails are some of
the most time-consuming stages of 21st-century document discovery.”).
B.
The SEC Should Not Be Permitted to Depose BAM’s CEO and CFO
The Court also should not allow the SEC to take the depositions of BAM’s CEO and CFO,
BAM’s two most senior executives. Deposing BAM’s CEO and CFO is unnecessary given that
BAM has repeatedly offered depositions of senior employees with direct responsibility over and
deep knowledge of the security, custody, and transfer of customer assets; would be unproductive
given that BAM’s CEO and CFO have little, if any, knowledge concerning the core issues
underlying the Consent Order; and would be disruptive to BAM’s business. For these reasons
alone, the SEC’s request should be denied. See Wilson v. DNC Servs. Corp., 831 F. App’x 513,
515 (D.C. Cir. 2020) (“[A] district court must limit the deposition of a party when the court
determines that the information sought ‘can be obtained from some other source that is more
convenient, less burdensome, or less expensive.’” (quoting Fed. R. Civ. P. 26(b)(2)(C)(i))).
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Page 21 Moreover, when addressing deposition notices directed at an official at the highest level of
corporate management, numerous courts have “observed that such discovery creates a tremendous
potential for abuse or harassment.” Celerity, Inc. v. Ultra Clean Holding, Inc., 2007 WL 205067,
at *3 (N.D. Cal. Jan. 25, 2007) (collecting cases); see also Reif v. CNA, 248 F.R.D. 448, 451-(E.D. Pa. 2008) (collecting cases).2 The “apex doctrine,” which is the modern trend among federal
courts, supports that requests to depose top officials and business leaders should be met with
skepticism. In order to depose them, requesting parties bear the burden of establishing that: (i) the
executive has unique firsthand knowledge of relevant facts; and (ii) those facts cannot be obtained
through less intrusive forms of discovery, such as other witnesses. See, e.g., Affinity Labs of Tex.
v. Apple, Inc., 2011 WL 1753982, at *17 (N.D. Cal. May 9, 2011) (denying motion to compel
deposition of Steve Jobs); In re Ski Train Fire of Nov. 11, 2000 Kaprun Austria, 2006 WL
1328259, at *10 (S.D.N.Y. May 16, 2006) (denying motion to compel depositions of Siemens AG
executives).
As discussed below, BAM’s CEO and CFO have no unique knowledge regarding any facts
relevant to limited topics identified in the expedited discovery provision of the Consent Order.
Even if they did possess such knowledge, there are numerous other witnesses and documents from
which the SEC can obtain the same (and likely more detailed) information. As a result, the burden

While BAM is not aware of a court in this District applying the apex doctrine to nongovernment executives, courts in this District regularly apply the doctrine to high-ranking
government officials. See, e.g., United States v. Newman, 531 F. Supp. 3d 181, 190 (D.D.C. 2021).
At least one court in this District has also cited favorably to applying the apex doctrine to nongovernment executives. See Alexander v. Fed. Bureau of Inv., 1998 WL 1048978, at *1 (D.D.C.
Mar. 2, 1998) (noting that “courts routinely use their discretion to control the discovery process to
require plaintiffs to start their discovery with witnesses most knowledgeable of the relevant facts
before allowing deposition testimony of high-ranking corporate or government officials.”). As
discussed above, whether the apex doctrine applies or not, the Court should still preclude
depositions of BAM’s CEO and CFO on a variety of grounds.
-15-
Page 22 of their depositions far outweighs and exceeds any possible benefit and the discovery sought by
the SEC from them is disproportionate to the needs contemplated by the Consent Order. This is
especially so given that the SEC ostensibly seeks to depose them on issues unrelated to the merits
of this case.
1.
BAM’s CEO and CFO Do Not Have Unique Firsthand Knowledge that
is Relevant to this Action
BAM’s CEO leads one of the largest digital asset trading platforms in the world, and his
responsibilities include executive level oversight of the company’s operations. BAM’s CFO has
responsibility for the company’s financials, and her responsibilities include executive decision
making involving digital assets. While BAM’s CEO and CFO have ultimate signatory authority
for certain fiat accounts, they are not involved in the day-to-day management details concerning
the custody and transfer of customer assets and, most importantly, they do not have unique
knowledge concerning those issues. See Celerity, Inc. v. Ultra Clean Holding, Inc., 2007 WL
205067, at *3 (N.D. Cal. Jan. 25, 2007) (“Where a high-level decision maker ‘removed from the
daily subjects of the litigation’ has no unique personal knowledge of the facts at issue, a deposition
of the official is improper.”).
The SEC has not explained why deposing BAM’s CEO and CFO would be within the
relevant scope of the Consent Order. During the meet and confer process, the SEC suggested that
they need to depose these and other witnesses because BAM has not produced sufficient
communications concerning customer assets. For the reasons discussed in the foregoing section,
the SEC is not entitled to “all communications” from potential witnesses in order to assess BAM’s
asset custody practices. Regardless, the SEC’s position reinforces why deposing BAM’s CEO and
CFO would be improper because they have no articulable basis for deposing them other than to
conduct a fishing expedition. See infra Part I.C.
-16-
Page 23 BAM is also concerned that the SEC plans to use depositions of BAM’s CEO and CFO
(and potentially other witnesses) to address topics wholly unrelated to the Consent Order and/or
relating to the merits of this case. For example, BAM has consistently taken the position that the
SEC is not entitled to conduct freewheeling discovery of BAM’s historical asset custody practices.
If the SEC believes it is entitled to discovery on those issues—which have nothing to do with the
merits of this case or whether customer assets are presently secure—then it should file a motion
with the Court. The SEC is not, however, permitted to do an end-run-around the meet and confer
process by seeking discovery during depositions on issues BAM has objected to. Nor can the SEC
use depositions pursuant to the Consent Order to conduct merits discovery.
2.
Less Intrusive Discovery is Readily Available, including Documentary
Evidence and Testimony From Persons Who are Directly Responsible
for the Custody, Security, and Transfer of Customer Assets
Even if BAM’s CEO and CFO possessed unique firsthand knowledge on issues relevant to
the Consent Order, less intrusive discovery is readily available to the SEC. There are many other
BAM employees who do have deep firsthand knowledge about the facts surrounding the security,
custody, and transfer of customer assets, and who have been offered to the SEC as appropriate
witnesses. They include (i) Mr. Kellogg, BAM’s CISO who is responsible for administering and
managing the security of digital assets held by BAM on behalf of its customers or for its own
account; (ii) Ms. Sisenwein, BAM’s Senior Director of Treasury Operations who is responsible
for managing and maintaining BAM’s banking and payment process relationships concerning fiat
currency; and (iii) the leader of BAM’s Asset Clearance Team who oversees the BAM group
responsible for monitoring and managing wallet balances based on predetermined thresholds and
processes, as well as validating and requesting corporate and customer transfers between wallets.
These individuals have far deeper knowledge concerning the custody, security, and transfer
of customer assets than BAM’s CEO and CFO. The first logical step for the SEC is to explore
-17-
Page 24 these issues with those directly responsible for them before trying to force BAM’s CEO and CFO
to testify about topics over which they exercise (at most) executive level oversight. The SEC also
has other less intrusive means of discovery. The SEC possesses numerous documents and
substantial information concerning BAM’s asset custody practices, and it has not explained why
this information is insufficient to satisfy its concerns. Another logical step would be for the SEC
to confer with BAM about any concerns it has regarding this information and documents so that
BAM could identify those best situated to address those concerns, but the SEC has not
meaningfully done so. Moreover, if the SEC plans to conduct depositions of BAM’s CEO and
CFO to discover information outside the bounds of the Consent Order, that would be improper.
See supra Part I.A.
In sum, BAM’s CEO and CFO need not be deposed on the limited topics authorized in the
Consent Order, and courts regularly preclude such depositions in the circumstances presented here.
See, e.g., Treppel v. Biovail Corp., 2006 WL 468314, at *2 (S.D.N.Y. Feb. 28, 2006) (courts
consider whether “the likelihood that the individual possesses relevant knowledge and whether
another source could provide identical information”); Regail Brand All., Inc. v. Factory Mut. Ins.
Co., 2008 WL 622810, at *5 (S.D.N.Y. Mar. 7, 2008) (“Unless it can be demonstrated that a
corporate official has ‘some unique knowledge’ of these issues in this case, ‘it may be appropriate
to preclude a deposition of a highly-placed executive’ while allowing other witnesses with the
same knowledge to be questioned.”); Gen. Star Indem. Co. v. Platinum Indem. Ltd., 210 F.R.D.
80, 83 (S.D.N.Y. 2002) (protective order appropriate when party seeking deposition of executives
“had not yet attempted to obtain information from lower level executives”); Hallmark Licensing
LLC v. Dickens Inc., 2018 WL 6573435, at *5 (E.D.N.Y. Dec. 13, 2018) (precluding deposition
of senior executive where subordinate with same knowledge was available to be deposed); Affinity
-18-
Page 25 Labs of Tex., 2011 WL 1753982, at *12 (the failure to obtain the answers plaintiffs wanted from
lower level employees does not automatically justify their reaching higher, without the requisite
showing of the higher-level official’s unique personal knowledge); Rodriguez v. SLM Corp., WL 1286989, at *2 (D. Conn. Mar. 26, 2010) (denying deposition where requesting party failed
to demonstrate apex leaders “possess any information that could not be obtained from lower-level
employees or other sources”).
C.
The SEC’s Discovery Demands are an Inappropriate Fishing Expedition
Discovery is not limitless, and courts routinely preclude voluminous discovery requests
unmoored to the actual issues in the litigation. Pederson v. Preston, 250 F.R.D. 61, 66 (D.D.C.
2008). Courts do not tolerate “‘fishing expeditions,’ discovery abuse and inordinate expense
involved in overbroad and far-ranging discovery requests.” Id. at 65-66 (D.D.C. 2008) (quoting
Hardrick v. Legal Servs. Corp., 96 F.R.D. 617, 618 (D.D.C. 1983)). Rather, “[d]iscovery should
be tailored to the issues involved in a particular case.” Id. at 66.
The SEC’s approach to expedited discovery has been anything but tailored to the Consent
Order. At the outset of expedited discovery, the SEC served stunningly overbroad and unduly
burdensome requests, many of which have little if anything to do with BAM’s customer assets.
While BAM has repeatedly proposed ways to limit those requests, the SEC has refused to
meaningfully do the same and, to this day, takes the position that BAM is required to produce “all
communications” concerning numerous topics for noticed deponents. The SEC has also declined
reasonable invitations from BAM to interview those who are best suited to address issues
concerning asset custody practices. The SEC’s approach is unreasonable and not designed to
obtain the “limited expedited discovery” authorized by the Consent Order.
There is no basis to authorize the discovery sought by the SEC. By fulfilling its obligations
under the Consent Order, BAM confirmed that customer assets are safe and secure and that it has
-19-
Page 26 sufficient assets to cover any customer claims or liabilities. BAM has repatriated to the United
States all fiat and crypto customer assets and related hardware, confirmed that BAM would
maintain custody and control over customer assets during the pendency of the case and not transfer
any assets to Binance Entities, and ensured that all private and administrative keys are in the
possession of BAM employees in the United States. BAM has separately provided an enormous
amount of documents and information to the SEC through document productions, Interrogatory
responses, and follow-up letters and other correspondence.
Accordingly, the SEC already has the relief it wants—confirmation that BAM’s customer
assets are safe, secure, and sufficient to cover any customer claims or liabilities. Although it has
expressed its “concerns” otherwise, the SEC has still yet to identify any evidence suggesting that
customer assets were misused or dissipated in any way. Rather, the SEC continues to make
unreasonable discovery demands, which would take many months or longer to address. The SEC’s
discovery demands should be rejected for what they are—an inappropriate fishing expedition
without a justifiable basis on matters having nothing to do with the merits of this case. Diamond
Servs. Mgmt. Co., 339 F.R.D. at 340 (“Discovery is not intended to be a fishing expedition, but is
rather meant to allow the parties to flesh out allegations for which they initially have at least a
modicum of objective support.” (citation omitted)).
CONCLUSION
For the foregoing reasons, the Court should enter the Proposed Protective Order.
-20-
Page 27 Dated: August 14,
Respectfully submitted,
/s/ Matthew T. Martens
William R. McLucas (pro hac vice)
Matthew T. Martens (D.C. Bar #1019099)
Matthew Beville (pro hac vice)
WILMER CUTLER PICKERING HALE
AND DORR LLP
2100 Pennsylvania Avenue NW
Washington, DC William.McLucas@wilmerhale.com
Matthew.Beville@wilmerhale.com
Matthew.Martens@wilmerhale.com
/s/ George S. Canellos
George S. Canellos (pro hac vice)
Matthew J. Laroche (pro hac vice)
MILBANK LLP
55 Hudson Yards
New York, NY GCanellos@milbank.com
MLaroche@milbank.com
__________________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ _____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ __
__________________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ _____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ __
Attorneys for Defendants BAM Trading Services
Inc. and BAM Management Holdings US Inc.
Tiffany J. Smith (pro hac vice)
WILMER CUTLER PICKERING HALE
AND DORR LLP
7 World Trade Center
250 Greenwich Street
New York, NY Tiffany.Smith@wilmerhale.com
Attorneys for Defendants BAM Trading
Services Inc. and BAM Management
Holdings US Inc.
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