Page 1 UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.
No. 1-23-cv-01599-ABJ-ZMF
BINANCE HOLDINGS LIMITED,
BAM TRADING SERVICES INC.,
BAM MANAGEMENT US HOLDINGS
INC., AND CHANGPENG ZHAO,
Defendants.
JOINT STATUS REPORT
Pursuant to the Court’s direction at the October 13 hearing, Plaintiff Securities and
Exchange Commission (“SEC”), Defendants BAM Management US Holdings Inc. and BAM
Trading Services Inc. (collectively, “BAM”), Binance Holdings Limited (“Binance”) and
Changpeng Zhao respectfully submit this Joint Status Report.
I.
BAM-Related Discovery
A. Document Discovery
i. SEC’s Position
At the October 13 hearing the Court directed BAM to make “robust” rolling productions
within two weeks, and to provide written confirmation of the scope and timing of all productions
and other responses in connection with each of the requests the SEC sent BAM on September (“September 21 Requests”). See Oct. 13, 2023 Tr. pp. 26: 23-25 – 27: 1-3; 28: 4-15. The Court
also directed that, to the extent BAM believed a request to be overbroad, for BAM to put a “finePage 2 point” on how to address the question presented in the request. Oct. 13, 2023 Hr’g Tr. p. 31: 712. In short, BAM is required to provide a “crystallized position as to what it is they want to
produce and what they don’t want to produce,” id. p. 69, because “generic overbreadth and
burden” objections “are not going to carry the day.” Id. p. 17.
BAM’s first production since the hearing came late in the evening on Friday, October 27,
which the SEC has only been able to begin processing and reviewing. In the production cover
letter, BAM represented it was continuing to search for responsive documents, without
specifying the scope or timing of the search or production. In addition, BAM raised objections
to certain of the SEC’s targeted requests, claiming they are overly broad and unduly burdensome,
without further specification. The parties held a meet and confer call on October 30 to discuss
the scope of that production and BAM’s ongoing searches for responsive documents but were
not able to resolve open questions regarding the productions.
In the Joint Status Report, BAM has articulated that it plans to commit to search for and
produce by November 13 responsive documents to all but two of the SEC’s document and
communications requests, but has also suggested that some requests may be too broad or
burdensome, again without explaining why.
As to the agreed inspection of BAM’s relevant systems and software, the SEC has
identified to BAM counsel the systems and software that would be subject to the proposed
inspection. Consistent with the discussion during the recent hearing, the SEC requested a meet
and confer to discuss the manner and means of execution to ensure an efficient and effective
process. The SEC continues to reserve its request for source code, particularly if the inspection
does not provide the information necessary to assess the custody and control of the private keys. Page 3 In short, given the timing of BAM’s recent production, and BAM’s failure to provide the
SEC with its production plan for each of the SEC’s requests as directed by the Court (see, e.g.,
Oct. 13, 2023 Hr’g Tr. 40-42) or the basis for any of its current or potential future objections, the
SEC has limited ability to provide a fulsome position in this status report as to where the parties
stand on the current status of BAM’s productions. The SEC can confirm that its requests are still
not satisfied, and it lacks even a general sense of what documents or communications it should
expect in response to various outstanding discovery requests, or what custodians or data sources
are being searched. For those communications requests for which BAM has produced
documents, the productions have been minimal, and BAM has not confirmed these productions
are complete. Moreover, during the recent meet and confer, BAM stated it was still evaluating
whether it had possession, custody, and control of certain communications about which its own
witnesses had testified in depositions.
In light of the current status, the SEC believes that even with BAM’s promise to produce
additional documents and communications by November 13, there will likely be discovery issues
that remain unresolved. The SEC believes a conference with the Court after November 13, when
BAM expects to complete its production, would be helpful to address any outstanding issues that
the parties cannot resolve. The SEC is ready to coordinate with the Court and the Defendants on
the date of such hearing so that it is soon after November 13.
ii. BAM’s Position
Following the Court conference on October 13, 2023, BAM has made substantial
progress in responding to the Document and Communications Requests. On October 27, 2023,
BAM made a document production consisting of 3,675 pages of documents responsive to 14 of
the SEC’s Document Requests and two of the SEC’s Communications Requests. In addition, Page 4 BAM informed the SEC that it has been unable to locate any documents responsive to three
Document Requests and one subsection of a Document Request after a reasonable search. To
date, BAM has produced documents or confirmed that it was unable to locate responsive
documents for approximately 65% of the SEC’s Document Requests.
BAM has also made substantial progress in responding to the SEC’s other
Communications Requests. As BAM informed the SEC in its October 27 letter, BAM is in the
process of reviewing email data collected from the Company’s Chief Information Security
Officer (“CISO”). BAM has agreed to produce all responsive, non-privileged documents
identified through a reasonable search of that data on or before November 13, 2023.
Furthermore, as BAM informed the SEC on the October 30 call, BAM is continuing to search for
communications over Slack and other chat programs that are responsive to the Communications
Requests. BAM believes that these documents will adequately address the SEC’s
Communications Requests that have not been previously addressed through BAM’s document
productions.
As instructed by the Court, BAM has also identified to the SEC the Requests to which it
is objecting. In an effort to narrow BAM’s objections to the Document Requests, BAM’s
October 27 letter identified documents and deposition testimony responsive to Document
Request Nos. 1 and 2. BAM continues to object to Document Request Nos. 30 and 31, which
seek highly sensitive source code, but, as noted, otherwise is making an effort to search for and
produce documents responsive to each of the SEC’s Document Requests. BAM also informed
the SEC in its October 27, 2023 letter that it objects to Document Request Nos. 39 and 40 on the
grounds that they are overly broad and unduly burdensome, and identified the documents that
BAM has produced to date which it believes satisfied those Requests. Requests 39 and 40 seek Page 5 reconciliation information concerning corporate and customer fiat and digital assets on a monthly
basis. BAM produced a detailed accounting of BAM’s corporate and customer assets as of June
30, 2023 on August 7, 2023 pursuant to the Consent Order. This was a significant endeavor, and
BAM continues to believe that the SEC’s request for similar information on a monthly basis is
overly broad and unduly burdensome.
BAM is currently performing targeted searches for each one of the Document and
Communications Requests to which it has agreed to produce documents, and it expects to
produce documents responsive to most, if not all, of the remaining Document Requests (or
inform the SEC that it has been unable to locate responsive documents after a reasonable search)
on or before November 13, 2023. BAM believes that this production plan is entirely consistent
with the Court’s instructions, and does not agree with the SEC’s suggestion that BAM has failed
to provide any information that the Court required.
Because of the recent reductions in force at BAM, BAM anticipates that there may be a
small number of Requests for which BAM may require additional time to identify responsive
documents, or for which it would be unduly burdensome for BAM to produce responsive
documents. To the extent BAM determined that it requires additional time to produce
documents in responsive to any of the Requests, or that it would be unduly burdensome to do so,
BAM proposes that the parties meet and confer after November 13, 2023 to discuss alternative
means of providing the information sought by those Requests. To be clear, BAM is not currently
aware of any specific Requests that it does not expect to satisfy by November 13, 2023.
However, given the number and breadth of the Requests contained in the SEC’s September 21,
2023 letter, BAM believes that it is prudent to consider how to proceed if it finds that it is unable
to produce documents in response to any of the SEC’s requests without undue burden. Page 6 Finally, BAM facilitated the SEC’s inspection of a shard device on October 24, 2023.
During a meet and confer on October 18, 2023, BAM also confirmed that it is willing to allow
the SEC to conduct an inspection of certain other of its systems and provided an overview of
what it expected that inspection would entail. The SEC indicated that it would discuss the
inspection internally and provide BAM with its position as to its desired scope of the inspection.
Although the SEC states above that it has provided its expectations concerning the scope of the
inspection, this is incorrect. The SEC has not yet provided its position and on the evening of
October 25, proposed another meet and confer on this issue.
BAM agrees that it would be productive to hold a conference with the Court after BAM
completes its production of documents in response to the Requests to the extent there any open
issues. However, BAM believes that it would be more productive to hold such a conference on
or after November 20, 2023 (one week after BAM expects to complete or substantially complete
productions in response to the SEC’s Requests) to allow the SEC to review BAM’s productions,
and allow the parties to discuss any issues that may arise.
B. Depositions
i. Joint Update
In its September 21 letter, the SEC requested the depositions of eight BAM employees in
addition to a 30(b)(6) deposition. The SEC conducted the first of those depositions on October
24, 2023. The next deposition is scheduled for October 31, 2023, and the parties are working to
schedule depositions for the other witnesses, with all but a few dates confirmed. In addition, the
parties are meeting and conferring with regard to the 30(b)(6) topics. On October 18, 2023,
BAM informed the SEC that it plans to designate testimony given by BAM witnesses as 30(b)(6)
testimony for certain of the topics, and that the parties can then meet and confer with regard to Page 7 topics that have not yet been addressed by such designations or for which additional testimony is
necessary.
The SEC has not yet agreed to this retrospective approach as consistent with Rule
30(b)(6), but will continue to confer with BAM on this issue after BAM provides its proposed
designations, which BAM anticipates providing this week. Consistent with the Court’s direction
at the September 18 hearing, the parties will make submissions to the Court stating their
positions on the SEC’s pending requests for the depositions of BAM’s former CEO and CFO
after the other agreed depositions have been completed.C. Interrogatories
i. SEC’s Position
In response to the SEC’s Motion to Compel, BAM agreed that it would supplement its
prior interrogatory response See Resp. Mot. to Compel, at 16, Dkt. No. 107. Likewise, during
the October 13 hearing, BAM’s counsel indicated that they would provide supplemental
interrogatory responses. See Oct. 13, 2023 Tr. pg. 66: 14-25. Although BAM’s counsel
represented that it would provide a timeline for these responses within two weeks, BAM has not
yet provided such a timeline. See Oct. 13, 2023 Tr. pg. 67: 16-25.
The SEC reserves the right to raise the issue sooner based on information revealed during
ongoing discovery. During a recent deposition, a witness testified that Jasmine Lee was part of
the same reduction in force as BAM’s former CEO, and she will be departing (or has already
departed) the Company. In the meantime, she is no longer serving as BAM’s CFO, and BAM
has an acting CFO. It would therefore appear that BAM’s reliance upon the Apex doctrine in
support of its objections to Ms. Lee’s deposition no longer apply, although the SEC will seek
further details form BAM on this issue.
BAM does not believe that the SEC’s position that the Apex doctrine no longer applies is an
accurate statement of the law. Nor does BAM believe that any additional depositions are
necessary given that BAM has already agreed to at least 13 depositions (including a 30(b)(6)
deposition) and, to date, the SEC has yet to identify any evidence that BAM’s customer assets
have been misused in any way. Page 8 ii. BAM’s Position
BAM has prioritized responding to the SEC’s Document and Communications Requests
and preparing 8 witnesses for depositions. BAM anticipates being in a position to update its
interrogatories by November 20, 2023.
D. Part IV of Consent Order
i. SEC’s Position
Part IV of the Consent Order requires BAM to, among other things, provide information
about “each” wallet and account holding company or Customer Assets, and corresponding
balances. Consent Order, IV. By letter dated October 27, BAM informed the SEC that it will be
supplementing its verified accounting with wallet-level balances for the deposit wallets of its
customers this week. By letter dated October 30, the SEC requested that BAM ensure that this
anticipated production include the list of all customers, their user IDs, and their customer deposit
wallet addresses. The SEC also reiterated its request for the individual staking information (as
required under Section IV) and related financial information to inform the analysis. The parties
will continue to meet and confer on these issues after BAM makes its production.
E. BAM’s Position
In BAM’s verified accounting, BAM provided account level data for all of BAM’s hot
wallets and cold wallets, and aggregate data for all of BAM’s deposit wallets. As BAM explained
in its August 7, 2023 letter, BAM produced this data in the aggregate because there are almost 1.million such wallets on BAM’s platform. The SEC has requested that BAM produce account level
data for BAM’s deposit wallets. Page 9 Although BAM does not agree with the SEC’s assertions that account level data for BAM’s
deposit wallets is necessary, BAM has agreed to provide account level data for all of its deposit
accounts. BAM expects to be able to produce this data by November 6, 2023.
II.
Binance/Zhao-Related Discovery
A. SEC’s Position
In accordance with the Court’s guidance in the September 18 hearing, on October 5, the
SEC sent Defendants Binance Holdings Limited (“Binance”) and Changpeng Zhao a targeted list
of specific documents it requested that Binance and Zhao produce during the ongoing
discussions with BAM while reserving the SEC’s right to seek additional documents responsive
to the SEC’s First Requests for Production of Documents. The targeted list of requests are not
new, but, rather, a subset of priority requests that fall within the SEC’s First Requests for
Production of Documents served on August 3, seeking discovery that BAM claims it does not
have within its possession, custody, and control. The SEC, Binance, and Zhao held a meet and
confer call on October 19 to meet and confer on these requests. As the SEC explained to
Binance during the recent meet and confer, the requested discovery addresses the critical issues
of custody and control of BAM and Customer Assets, and the software and related technology
developed and operated by Binance governing the custody, control, and transfer of assets; not
“hypothetical software security risks.” Binance’s counsel expressed willingness to produce
documents to address the core concerns of Binance’s control over BAM’s assets, but has not
committed to any specific scope or timing of such production. Testimony to date continues to
suggest that Binance and/or Mr. Zhao possess documents and other information that may be
dispositive of the key issues under the Consent Order and now before the Court. Therefore, the
SEC requests a conference with the Court to discuss the scope and timing of Binance’s document Page 10 productions, to be scheduled on a date soon after November 13 that is determined in coordination
with the Court and the Defendants.B. Binance and Zhao’s Position
BHL would be pleased to address the Court at any time but respectfully submits that it
would be most practical to afford BHL a reasonable time to conduct further diligence on the
SEC’s discovery requests first. Although the parties had previously agreed that discovery would
be sequenced to focus first on BAM, BHL offered at a hearing before this Court on September
18, 2023 to consider targeted requests from the SEC while discovery as to BAM was ongoing.
The SEC served BHL with revised requests about two-and-a-half weeks later, on October 5.
BHL met and conferred in good faith with the SEC on October 19 and is working to address the
SEC’s new discovery requests, as clarified by the parties’ conferral.
The SEC nonetheless seeks a hearing “soon after November 13,” implying that BHL
already had ample time to assess its requests before the parties met and conferred about them
even once. Any suggestion that BHL should already know what it will produce and when
ignores the parties’ earlier agreement to sequence discovery, the Court’s subsequent input on the
proper scope of these initial proceedings, and significant changes to the SEC’s requests. The
SEC’s initial requests sought 35 broad categories of documents, vastly exceeding the scope of
discovery permitted under the Consent Order. And sweeping as they were, the SEC’s initial
The SEC continues to reserve the right to seek further relief from the Court if the parties are
unable to resolve pending issues regarding Binance’s productions in response to Section IV of
the Consent Order. See Mot. to Compel Memo at 15 n.4. Pending issues include Binance’s
continued withholding of information required under Section IV pending entry of a protective
order. Page 11 requests did not request the production of BHL’s “source code”—which is the central focus of
many requests the SEC served on October 5.Under the circumstances, it is unreasonable to expect that BHL could have determined
the best means of answering the SEC’s new requests, which largely demand that BHL disprove
hypothetical software security risks, in just eleven days—less time than it took the SEC to send
its revised requests. It is unreasonable to expect that BHL could have determined the best means
of answering the SEC’s new requests, which largely demand that BHL disprove hypothetical
software security risks, in just ten days—far less time than it took the SEC to send its revised
requests. BHL, thus, proposes that the parties continue diligent work on this matter, submit
another joint status report on or before November 21, 2023, and advise the Court on their views
as to whether a hearing would be productive at that time.
III.
Proposed Protective Order
Consistent with the Court’s direction, the parties will soon file a proposed Protective
Order and related motion that limits the scope of the previously filed Protective Order to
information disclosed pursuant to the Consent Order.
BHL timely produced the information required under Section IV of Consent Order and has also
answered several follow up requests, including most recently on September 11, 2023. Aside
from ongoing consideration of whether to produce additional personal identifiable information
associated with already-identified accounts, as referenced in note 2, the SEC has not asked for
further information, and BHL is aware of no pending issues.
3Page 12 Dated: October 31, /s/ Daniel W. Nelson
Daniel W. Nelson (D.C. Bar #433415)
Richard W. Grime (pro hac vice)
Jason J. Mendro (D.C. Bar #482040)
Stephanie Brooker (pro hac vice)
M. Kendall Day (pro hac vice
forthcoming)
GIBSON, DUNN & CRUTCHER LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-DNelson@gibsondunn.com
RGrime@gibsondunn.com
JMendro@gibsondunn.com
SBrooker@gibsondunn.com
KDay@gibsondunn.com
Attorneys for Defendant Binance
Holdings Limited
Respectfully submitted,
/s/ Matthew Scarlato
Matthew F. Scarlato (D.C. Bar No. 484124)
Jennifer L. Farer (D.C. Bar No. 1013915)
David A. Nasse
SECURITIES AND EXCHANGE
COMMISSION
100 F Street, NE
Washington, DC 20549-(202) 551-3749 (Scarlato)
nassed@sec.gov
farerj@sec.gov
scarlatom@sec.gov
J. Emmett Murphy
Jorge G. Tenreiro
Elisa Solomon
SECURITIES AND EXCHANGE
COMMISSION
100 Pearl Street
New York, NY (212) 336-0078 (Murphy)
murphyjoh@sec.gov
tenreiroj@sec.gov
Attorneys for Plaintiff Securities and
Exchange Commission Page 13 /s/ Abid Qureshi
Abid R. Qureshi (D.C. Bar No. 459227)
William R. Baker, III (D.C. Bar No.
383944)
Erik S. Volkman (D.C. Bar No. 490999)
Michael E. Bern (D.C. Bar No. 994791)
LATHAM & WATKINS LLP
555 Eleventh Street, NW, Suite Washington, DC Tel: (202) 637-Fax: (202) 637-abid.qureshi@lw.com
william.baker@lw.com
eric.volkman@lw.com
michael.bern@lw.com
Douglas K. Yatter (pro hac vice pending)
Benjamin Naftalis (pro hac vice pending)
LATHAM & WATKINS LLP
1271 Avenue of the Americas
New York, NY Tel: (212) 906-Fax: (212) 751-douglas.yatter@lw.com
benjamin.naftalis@lw.com
Heather A. Waller (pro hac vice pending)
LATHAM & WATKINS LLP
330 North Wabash Avenue, Suite Chicago, IL Tel: (312) 876-Fax: (312) 993-heather.waller@lw.com
/s/ Matthew T. Martens
Matthew T. Martens
William R. McLucas (pro hac vice pending)
WILMER CUTLER PICKERING HALE AND
DORR LLP
2100 Pennsylvania Avenue NW
Washington, DC (202) 663-Fax: (202) 663-matthew.martens@wilmerhale.com
william.mclucas@wilmerhale.com
Tiffany J. Smith (pro hac vice pending)
WILMER CUTLER PICKERING HALE
AND DORR LLP
7 World Trade Center
250 Greenwich Street
New York, NY tiffany.smith@wilmerhale.com
George S. Canellos
Matthew Laroche
MILBANK LLP
55 Hudson Yards
New York, NY 10001-212-530-gcanellos@milbank.com
mlaroche@milbank.com
Attorneys for Defendants BAM Trading Services
Inc. and BAM Management Holdings
US Inc.
Melanie M. Blunschi (pro hac vice pending)
LATHAM & WATKINS LLP
505 Montgomery Street, Suite San Francisco, CA 94111-Tel: (415) 391-Fax: (415) 395-melanie.blunschi@lw.com
Attorneys for Defendant Changpeng
Zhao
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Case 1:23-cv-01599-ABJ-ZMF Document 168 Filed 10/31/23 Page 1 of 13
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.
No. 1-23-cv-01599-ABJ-ZMF
BINANCE HOLDINGS LIMITED,
BAM TRADING SERVICES INC.,
BAM MANAGEMENT US HOLDINGS
INC., AND CHANGPENG ZHAO,
Defendants.
JOINT STATUS REPORT
Pursuant to the Court’s direction at the October 13 hearing, Plaintiff Securities and
Exchange Commission (“SEC”), Defendants BAM Management US Holdings Inc. and BAM
Trading Services Inc. (collectively, “BAM”), Binance Holdings Limited (“Binance”) and
Changpeng Zhao respectfully submit this Joint Status Report.
I.
BAM-Related Discovery
A. Document Discovery
i. SEC’s Position
At the October 13 hearing the Court directed BAM to make “robust” rolling productions
within two weeks, and to provide written confirmation of the scope and timing of all productions
and other responses in connection with each of the requests the SEC sent BAM on September 21
(“September 21 Requests”). See Oct. 13, 2023 Tr. pp. 26: 23-25 – 27: 1-3; 28: 4-15. The Court
also directed that, to the extent BAM believed a request to be overbroad, for BAM to put a “fine
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point” on how to address the question presented in the request. Oct. 13, 2023 Hr’g Tr. p. 31: 712. In short, BAM is required to provide a “crystallized position as to what it is they want to
produce and what they don’t want to produce,” id. p. 69, because “generic overbreadth and
burden” objections “are not going to carry the day.” Id. p. 17.
BAM’s first production since the hearing came late in the evening on Friday, October 27,
which the SEC has only been able to begin processing and reviewing. In the production cover
letter, BAM represented it was continuing to search for responsive documents, without
specifying the scope or timing of the search or production. In addition, BAM raised objections
to certain of the SEC’s targeted requests, claiming they are overly broad and unduly burdensome,
without further specification. The parties held a meet and confer call on October 30 to discuss
the scope of that production and BAM’s ongoing searches for responsive documents but were
not able to resolve open questions regarding the productions.
In the Joint Status Report, BAM has articulated that it plans to commit to search for and
produce by November 13 responsive documents to all but two of the SEC’s document and
communications requests, but has also suggested that some requests may be too broad or
burdensome, again without explaining why.
As to the agreed inspection of BAM’s relevant systems and software, the SEC has
identified to BAM counsel the systems and software that would be subject to the proposed
inspection. Consistent with the discussion during the recent hearing, the SEC requested a meet
and confer to discuss the manner and means of execution to ensure an efficient and effective
process. The SEC continues to reserve its request for source code, particularly if the inspection
does not provide the information necessary to assess the custody and control of the private keys.
2
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In short, given the timing of BAM’s recent production, and BAM’s failure to provide the
SEC with its production plan for each of the SEC’s requests as directed by the Court (see, e.g.,
Oct. 13, 2023 Hr’g Tr. 40-42) or the basis for any of its current or potential future objections, the
SEC has limited ability to provide a fulsome position in this status report as to where the parties
stand on the current status of BAM’s productions. The SEC can confirm that its requests are still
not satisfied, and it lacks even a general sense of what documents or communications it should
expect in response to various outstanding discovery requests, or what custodians or data sources
are being searched. For those communications requests for which BAM has produced
documents, the productions have been minimal, and BAM has not confirmed these productions
are complete. Moreover, during the recent meet and confer, BAM stated it was still evaluating
whether it had possession, custody, and control of certain communications about which its own
witnesses had testified in depositions.
In light of the current status, the SEC believes that even with BAM’s promise to produce
additional documents and communications by November 13, there will likely be discovery issues
that remain unresolved. The SEC believes a conference with the Court after November 13, when
BAM expects to complete its production, would be helpful to address any outstanding issues that
the parties cannot resolve. The SEC is ready to coordinate with the Court and the Defendants on
the date of such hearing so that it is soon after November 13.
ii. BAM’s Position
Following the Court conference on October 13, 2023, BAM has made substantial
progress in responding to the Document and Communications Requests. On October 27, 2023,
BAM made a document production consisting of 3,675 pages of documents responsive to 14 of
the SEC’s Document Requests and two of the SEC’s Communications Requests. In addition,
3
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BAM informed the SEC that it has been unable to locate any documents responsive to three
Document Requests and one subsection of a Document Request after a reasonable search. To
date, BAM has produced documents or confirmed that it was unable to locate responsive
documents for approximately 65% of the SEC’s Document Requests.
BAM has also made substantial progress in responding to the SEC’s other
Communications Requests. As BAM informed the SEC in its October 27 letter, BAM is in the
process of reviewing email data collected from the Company’s Chief Information Security
Officer (“CISO”). BAM has agreed to produce all responsive, non-privileged documents
identified through a reasonable search of that data on or before November 13, 2023.
Furthermore, as BAM informed the SEC on the October 30 call, BAM is continuing to search for
communications over Slack and other chat programs that are responsive to the Communications
Requests. BAM believes that these documents will adequately address the SEC’s
Communications Requests that have not been previously addressed through BAM’s document
productions.
As instructed by the Court, BAM has also identified to the SEC the Requests to which it
is objecting. In an effort to narrow BAM’s objections to the Document Requests, BAM’s
October 27 letter identified documents and deposition testimony responsive to Document
Request Nos. 1 and 2. BAM continues to object to Document Request Nos. 30 and 31, which
seek highly sensitive source code, but, as noted, otherwise is making an effort to search for and
produce documents responsive to each of the SEC’s Document Requests. BAM also informed
the SEC in its October 27, 2023 letter that it objects to Document Request Nos. 39 and 40 on the
grounds that they are overly broad and unduly burdensome, and identified the documents that
BAM has produced to date which it believes satisfied those Requests. Requests 39 and 40 seek
4
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Case 1:23-cv-01599-ABJ-ZMF Document 168 Filed 10/31/23 Page 5 of 13
reconciliation information concerning corporate and customer fiat and digital assets on a monthly
basis. BAM produced a detailed accounting of BAM’s corporate and customer assets as of June
30, 2023 on August 7, 2023 pursuant to the Consent Order. This was a significant endeavor, and
BAM continues to believe that the SEC’s request for similar information on a monthly basis is
overly broad and unduly burdensome.
BAM is currently performing targeted searches for each one of the Document and
Communications Requests to which it has agreed to produce documents, and it expects to
produce documents responsive to most, if not all, of the remaining Document Requests (or
inform the SEC that it has been unable to locate responsive documents after a reasonable search)
on or before November 13, 2023. BAM believes that this production plan is entirely consistent
with the Court’s instructions, and does not agree with the SEC’s suggestion that BAM has failed
to provide any information that the Court required.
Because of the recent reductions in force at BAM, BAM anticipates that there may be a
small number of Requests for which BAM may require additional time to identify responsive
documents, or for which it would be unduly burdensome for BAM to produce responsive
documents. To the extent BAM determined that it requires additional time to produce
documents in responsive to any of the Requests, or that it would be unduly burdensome to do so,
BAM proposes that the parties meet and confer after November 13, 2023 to discuss alternative
means of providing the information sought by those Requests. To be clear, BAM is not currently
aware of any specific Requests that it does not expect to satisfy by November 13, 2023.
However, given the number and breadth of the Requests contained in the SEC’s September 21,
2023 letter, BAM believes that it is prudent to consider how to proceed if it finds that it is unable
to produce documents in response to any of the SEC’s requests without undue burden.
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Finally, BAM facilitated the SEC’s inspection of a shard device on October 24, 2023.
During a meet and confer on October 18, 2023, BAM also confirmed that it is willing to allow
the SEC to conduct an inspection of certain other of its systems and provided an overview of
what it expected that inspection would entail. The SEC indicated that it would discuss the
inspection internally and provide BAM with its position as to its desired scope of the inspection.
Although the SEC states above that it has provided its expectations concerning the scope of the
inspection, this is incorrect. The SEC has not yet provided its position and on the evening of
October 25, proposed another meet and confer on this issue.
BAM agrees that it would be productive to hold a conference with the Court after BAM
completes its production of documents in response to the Requests to the extent there any open
issues. However, BAM believes that it would be more productive to hold such a conference on
or after November 20, 2023 (one week after BAM expects to complete or substantially complete
productions in response to the SEC’s Requests) to allow the SEC to review BAM’s productions,
and allow the parties to discuss any issues that may arise.
B. Depositions
i. Joint Update
In its September 21 letter, the SEC requested the depositions of eight BAM employees in
addition to a 30(b)(6) deposition. The SEC conducted the first of those depositions on October
24, 2023. The next deposition is scheduled for October 31, 2023, and the parties are working to
schedule depositions for the other witnesses, with all but a few dates confirmed. In addition, the
parties are meeting and conferring with regard to the 30(b)(6) topics. On October 18, 2023,
BAM informed the SEC that it plans to designate testimony given by BAM witnesses as 30(b)(6)
testimony for certain of the topics, and that the parties can then meet and confer with regard to
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topics that have not yet been addressed by such designations or for which additional testimony is
necessary.
The SEC has not yet agreed to this retrospective approach as consistent with Rule
30(b)(6), but will continue to confer with BAM on this issue after BAM provides its proposed
designations, which BAM anticipates providing this week. Consistent with the Court’s direction
at the September 18 hearing, the parties will make submissions to the Court stating their
positions on the SEC’s pending requests for the depositions of BAM’s former CEO and CFO
after the other agreed depositions have been completed.1
C. Interrogatories
i. SEC’s Position
In response to the SEC’s Motion to Compel, BAM agreed that it would supplement its
prior interrogatory response See Resp. Mot. to Compel, at 16, Dkt. No. 107. Likewise, during
the October 13 hearing, BAM’s counsel indicated that they would provide supplemental
interrogatory responses. See Oct. 13, 2023 Tr. pg. 66: 14-25. Although BAM’s counsel
represented that it would provide a timeline for these responses within two weeks, BAM has not
yet provided such a timeline. See Oct. 13, 2023 Tr. pg. 67: 16-25.
1
The SEC reserves the right to raise the issue sooner based on information revealed during
ongoing discovery. During a recent deposition, a witness testified that Jasmine Lee was part of
the same reduction in force as BAM’s former CEO, and she will be departing (or has already
departed) the Company. In the meantime, she is no longer serving as BAM’s CFO, and BAM
has an acting CFO. It would therefore appear that BAM’s reliance upon the Apex doctrine in
support of its objections to Ms. Lee’s deposition no longer apply, although the SEC will seek
further details form BAM on this issue.
BAM does not believe that the SEC’s position that the Apex doctrine no longer applies is an
accurate statement of the law. Nor does BAM believe that any additional depositions are
necessary given that BAM has already agreed to at least 13 depositions (including a 30(b)(6)
deposition) and, to date, the SEC has yet to identify any evidence that BAM’s customer assets
have been misused in any way.
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ii. BAM’s Position
BAM has prioritized responding to the SEC’s Document and Communications Requests
and preparing 8 witnesses for depositions. BAM anticipates being in a position to update its
interrogatories by November 20, 2023.
D. Part IV of Consent Order
i. SEC’s Position
Part IV of the Consent Order requires BAM to, among other things, provide information
about “each” wallet and account holding company or Customer Assets, and corresponding
balances. Consent Order, IV. By letter dated October 27, BAM informed the SEC that it will be
supplementing its verified accounting with wallet-level balances for the deposit wallets of its
customers this week. By letter dated October 30, the SEC requested that BAM ensure that this
anticipated production include the list of all customers, their user IDs, and their customer deposit
wallet addresses. The SEC also reiterated its request for the individual staking information (as
required under Section IV) and related financial information to inform the analysis. The parties
will continue to meet and confer on these issues after BAM makes its production.
E. BAM’s Position
In BAM’s verified accounting, BAM provided account level data for all of BAM’s hot
wallets and cold wallets, and aggregate data for all of BAM’s deposit wallets. As BAM explained
in its August 7, 2023 letter, BAM produced this data in the aggregate because there are almost 1.5
million such wallets on BAM’s platform. The SEC has requested that BAM produce account level
data for BAM’s deposit wallets.
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Although BAM does not agree with the SEC’s assertions that account level data for BAM’s
deposit wallets is necessary, BAM has agreed to provide account level data for all of its deposit
accounts. BAM expects to be able to produce this data by November 6, 2023.
II.
Binance/Zhao-Related Discovery
A. SEC’s Position
In accordance with the Court’s guidance in the September 18 hearing, on October 5, the
SEC sent Defendants Binance Holdings Limited (“Binance”) and Changpeng Zhao a targeted list
of specific documents it requested that Binance and Zhao produce during the ongoing
discussions with BAM while reserving the SEC’s right to seek additional documents responsive
to the SEC’s First Requests for Production of Documents. The targeted list of requests are not
new, but, rather, a subset of priority requests that fall within the SEC’s First Requests for
Production of Documents served on August 3, seeking discovery that BAM claims it does not
have within its possession, custody, and control. The SEC, Binance, and Zhao held a meet and
confer call on October 19 to meet and confer on these requests. As the SEC explained to
Binance during the recent meet and confer, the requested discovery addresses the critical issues
of custody and control of BAM and Customer Assets, and the software and related technology
developed and operated by Binance governing the custody, control, and transfer of assets; not
“hypothetical software security risks.” Binance’s counsel expressed willingness to produce
documents to address the core concerns of Binance’s control over BAM’s assets, but has not
committed to any specific scope or timing of such production. Testimony to date continues to
suggest that Binance and/or Mr. Zhao possess documents and other information that may be
dispositive of the key issues under the Consent Order and now before the Court. Therefore, the
SEC requests a conference with the Court to discuss the scope and timing of Binance’s document
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productions, to be scheduled on a date soon after November 13 that is determined in coordination
with the Court and the Defendants.2
B. Binance and Zhao’s Position
BHL would be pleased to address the Court at any time but respectfully submits that it
would be most practical to afford BHL a reasonable time to conduct further diligence on the
SEC’s discovery requests first. Although the parties had previously agreed that discovery would
be sequenced to focus first on BAM, BHL offered at a hearing before this Court on September
18, 2023 to consider targeted requests from the SEC while discovery as to BAM was ongoing.
The SEC served BHL with revised requests about two-and-a-half weeks later, on October 5.
BHL met and conferred in good faith with the SEC on October 19 and is working to address the
SEC’s new discovery requests, as clarified by the parties’ conferral.
The SEC nonetheless seeks a hearing “soon after November 13,” implying that BHL
already had ample time to assess its requests before the parties met and conferred about them
even once. Any suggestion that BHL should already know what it will produce and when
ignores the parties’ earlier agreement to sequence discovery, the Court’s subsequent input on the
proper scope of these initial proceedings, and significant changes to the SEC’s requests. The
SEC’s initial requests sought 35 broad categories of documents, vastly exceeding the scope of
discovery permitted under the Consent Order. And sweeping as they were, the SEC’s initial
2
The SEC continues to reserve the right to seek further relief from the Court if the parties are
unable to resolve pending issues regarding Binance’s productions in response to Section IV of
the Consent Order. See Mot. to Compel Memo at 15 n.4. Pending issues include Binance’s
continued withholding of information required under Section IV pending entry of a protective
order.
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requests did not request the production of BHL’s “source code”—which is the central focus of
many requests the SEC served on October 5.3
Under the circumstances, it is unreasonable to expect that BHL could have determined
the best means of answering the SEC’s new requests, which largely demand that BHL disprove
hypothetical software security risks, in just eleven days—less time than it took the SEC to send
its revised requests. It is unreasonable to expect that BHL could have determined the best means
of answering the SEC’s new requests, which largely demand that BHL disprove hypothetical
software security risks, in just ten days—far less time than it took the SEC to send its revised
requests. BHL, thus, proposes that the parties continue diligent work on this matter, submit
another joint status report on or before November 21, 2023, and advise the Court on their views
as to whether a hearing would be productive at that time.
III.
Proposed Protective Order
Consistent with the Court’s direction, the parties will soon file a proposed Protective
Order and related motion that limits the scope of the previously filed Protective Order to
information disclosed pursuant to the Consent Order.
BHL timely produced the information required under Section IV of Consent Order and has also
answered several follow up requests, including most recently on September 11, 2023. Aside
from ongoing consideration of whether to produce additional personal identifiable information
associated with already-identified accounts, as referenced in note 2, the SEC has not asked for
further information, and BHL is aware of no pending issues.
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Dated: October 31, 2023
/s/ Daniel W. Nelson
Daniel W. Nelson (D.C. Bar #433415)
Richard W. Grime (pro hac vice)
Jason J. Mendro (D.C. Bar #482040)
Stephanie Brooker (pro hac vice)
M. Kendall Day (pro hac vice
forthcoming)
GIBSON, DUNN & CRUTCHER LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5306
DNelson@gibsondunn.com
RGrime@gibsondunn.com
JMendro@gibsondunn.com
SBrooker@gibsondunn.com
KDay@gibsondunn.com
Attorneys for Defendant Binance
Holdings Limited
Respectfully submitted,
/s/ Matthew Scarlato
Matthew F. Scarlato (D.C. Bar No. 484124)
Jennifer L. Farer (D.C. Bar No. 1013915)
David A. Nasse
SECURITIES AND EXCHANGE
COMMISSION
100 F Street, NE
Washington, DC 20549-9040
(202) 551-3749 (Scarlato)
nassed@sec.gov
farerj@sec.gov
scarlatom@sec.gov
J. Emmett Murphy
Jorge G. Tenreiro
Elisa Solomon
SECURITIES AND EXCHANGE
COMMISSION
100 Pearl Street
New York, NY 10004
(212) 336-0078 (Murphy)
murphyjoh@sec.gov
tenreiroj@sec.gov
Attorneys for Plaintiff Securities and
Exchange Commission
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/s/ Abid Qureshi
Abid R. Qureshi (D.C. Bar No. 459227)
William R. Baker, III (D.C. Bar No.
383944)
Erik S. Volkman (D.C. Bar No. 490999)
Michael E. Bern (D.C. Bar No. 994791)
LATHAM & WATKINS LLP
555 Eleventh Street, NW, Suite 1000
Washington, DC 20004
Tel: (202) 637-2200
Fax: (202) 637-2201
abid.qureshi@lw.com
william.baker@lw.com
eric.volkman@lw.com
michael.bern@lw.com
Douglas K. Yatter (pro hac vice pending)
Benjamin Naftalis (pro hac vice pending)
LATHAM & WATKINS LLP
1271 Avenue of the Americas
New York, NY 10020
Tel: (212) 906-1200
Fax: (212) 751-4864
douglas.yatter@lw.com
benjamin.naftalis@lw.com
Heather A. Waller (pro hac vice pending)
LATHAM & WATKINS LLP
330 North Wabash Avenue, Suite 2800
Chicago, IL 60611
Tel: (312) 876-7700
Fax: (312) 993-9767
heather.waller@lw.com
/s/ Matthew T. Martens
Matthew T. Martens
William R. McLucas (pro hac vice pending)
WILMER CUTLER PICKERING HALE AND
DORR LLP
2100 Pennsylvania Avenue NW
Washington, DC 20037
(202) 663-6921
Fax: (202) 663-6363
matthew.martens@wilmerhale.com
william.mclucas@wilmerhale.com
Tiffany J. Smith (pro hac vice pending)
WILMER CUTLER PICKERING HALE
AND DORR LLP
7 World Trade Center
250 Greenwich Street
New York, NY 10007
tiffany.smith@wilmerhale.com
George S. Canellos
Matthew Laroche
MILBANK LLP
55 Hudson Yards
New York, NY 10001-2163
212-530-5792
gcanellos@milbank.com
mlaroche@milbank.com
Attorneys for Defendants BAM Trading Services
Inc. and BAM Management Holdings
US Inc.
Melanie M. Blunschi (pro hac vice pending)
LATHAM & WATKINS LLP
505 Montgomery Street, Suite 2000
San Francisco, CA 94111-6538
Tel: (415) 391-0600
Fax: (415) 395-8095
melanie.blunschi@lw.com
Attorneys for Defendant Changpeng
Zhao
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