Late on Friday, the Securities and Exchange Commission (SEC) announced an agreement with Binance, the world’s largest cryptocurrency exchange, allowing it to continue operating within the United States and safeguarding customer assets amidst an ongoing government lawsuit.
Following the SEC’s filing of fraud charges against Binance on June 5, the commission took action to freeze the exchange’s U.S. assets, which Binance’s legal team claimed would lead to its closure in the United States.
However, in a court filing on Friday, the SEC revealed that the two parties had reached a compromise after several days of court-ordered mediation. On Saturday morning, Judge Amy Berman Jackson, presiding over the case in federal court in Washington, approved the agreement.
According to the terms of the agreement, the funds belonging to customers of Binance.US, an affiliate of the larger offshore exchange, will be held in special digital repositories accessible exclusively by the U.S. exchange. These funds will not be accessible to Binance’s international operation or its founder, Changpeng Zhao. The deal specifies that Binance.US can transfer company assets solely to fulfill ordinary business expenses or obligations.
Binance expressed its satisfaction with the resolution, stating on Saturday, “While we firmly believe that the SEC’s request for emergency relief was entirely unwarranted, we are pleased that we have come to a resolution regarding this matter on mutually acceptable terms.”
Gurbir Grewal, the SEC’s director of enforcement, commented on Saturday, saying, “We have ensured that U.S. customers will have the ability to withdraw their assets from the platform while we work towards resolving the alleged underlying misconduct.”
The dispute over Binance’s assets forms part of a significant legal battle that could shape the future of the cryptocurrency industry in the United States.
In recent months, the SEC has taken aggressive measures against the industry, filing lawsuits against both Binance and Coinbase, the largest U.S. crypto exchange. As regulatory pressure intensifies, some crypto companies have pledged to fight these actions in court, while others are exploring options in countries with more lenient regulations, considering moving their operations outside the United States.
The agreement to safeguard customer assets within the United States marks the resolution of the initial legal skirmish, with more likely to follow. Through a comprehensive civil fraud lawsuit, the SEC has accused Binance and its founder, Mr. Zhao, of mishandling customer deposits, providing false information to regulators, and enabling market manipulation on the exchange.
In court filings, the SEC argued that an asset freeze was necessary to prevent Binance from jeopardizing user funds or moving money abroad. However, Binance claimed that the SEC’s proposal was overly punitive and would hinder the company’s ability to pay employees and vendors, ultimately leading to operational disruption.
In addition to the lawsuit from the SEC, Binance is also facing legal
Binance late Friday that would allow the world’s largest cryptocurrency exchange to keep operating in the United States and safeguard customer assets as the company battles a government lawsuit.
After filing fraud charges against Binance on June 5, the S.E.C. moved to freeze the firm’s U.S. assets in a move that the exchange’s lawyers said would put it out of business in the United States.
But in a court filing on Friday, the S.E.C. said that the two sides had reached a compromise after several days of court-ordered mediation. On Saturday morning, Judge Amy Berman Jackson, who is overseeing the case in federal court in Washington, signed off on the deal.
Under the agreement, funds belonging to customers of Binance.US, an affiliate of the company’s larger offshore exchange, would go into special digital repositories accessible only to the U.S. exchange — and not to Binance’s international operation, or its founder, Changpeng Zhao. The deal stipulates that Binance.US can transfer company assets “solely to make payments for expenses or to satisfy obligations incurred in the ordinary course of business.”
Binance said on Saturday, “Although we maintain that the S.E.C.’s request for emergency relief was entirely unwarranted, we are pleased that the disagreement over this request was resolved on mutually acceptable terms.”
The S.E.C.’s director of enforcement, Gurbir Grewal, said in a statement on Saturday, “We ensured that U.S. customers will be able to withdraw their assets from the platform while we work to resolve the alleged underlying misconduct.”
The dispute over Binance’s assets was part of a high-stakes legal battle that could determine the future of the crypto industry in the United States.
In recent months, the S.E.C. has embarked on an aggressive industry crackdown, suing Binance as well as its largest U.S. rival, the crypto exchange Coinbase. With the regulatory pressure intensifying, some crypto companies have vowed to fight in court, while others are exploring options outside the United States, decamping to countries with more lenient regulations.
The agreement to safeguard customer assets in the United States would resolve the first of what could be many legal skirmishes to come. The S.E.C., in a sweeping civil fraud lawsuit, charged Binance and Mr. Zhao with mishandling customers’ deposits, lying to regulators and allowing market manipulation to proliferate on the exchange.
In court filings, the S.E.C. said an asset freeze was necessary to ensure that Binance did not endanger user funds or seek to move money abroad. But the company said the S.E.C.’s proposal was overly punitive and would prevent the firm from paying employees and vendors, causing its operations to “quickly grind to a halt.”
Binance was also sued earlier this year by the Commodity Futures Trading Commission, and Mr. Zhao is under investigation by federal prosecutors. The company has argued that the S.E.C. is being unreasonable in going after the business and its founder. Four major law firms are representing Binance and Mr. Zhao, better known as C.Z., in the litigation in Washington.
At a court hearing in Washington on Tuesday, Judge Jackson expressed some skepticism over the S.E.C.’s strategy of using enforcement actions to impose regulatory oversight on the crypto world. She called the approach “inefficient and cumbersome” and it is one reason she urged the parties to negotiate a deal on safeguarding customer assets in the United States.
But Judge Jackson also gave short shrift to Binance’s argument that it was surprised by the aggressiveness of the S.E.C.
According to court filings, the S.E.C. has been investigating Binance since 2020. “Some of the surprise expressed in the pleadings rang a little hollow,” she told Binance’s lawyers on Tuesday.