Binance and SEC Reach Agreement to Prevent US Asset Lockdown
Binance has reached an agreement with the Securities and Exchange Commission that permits the cryptocurrency exchange to continue its operations in the US until the resolution of a lawsuit filed by the regulator earlier this month. The SEC had accused Binance and its founder, Changpeng Zhao, of inflating trading volumes, mishandling customer assets, and failing to prevent US investors from trading on Binance.com instead of a separate US system.
After the charges were announced, the SEC attempted to freeze Binance’s US assets. The regulator said the change was necessary to protect customer funds and prevent the company from transferring money overseas. Binance, on the other hand, argued that freezing the funds would end its business in the United States. On Tuesday, the judge overseeing the trial ordered both sides to reach a compromise that would protect the clients’ assets.
In a filing seen by The New York Times, the SEC said Friday that Binance had agreed to transfer all assets of its U.S. customers to the state. In addition, the company’s US operations are prohibited from providing access or control of domestic assets or funds to Binance’s international operations or to Zhao. Until the tie-up is resolved, Binance.US may “only” transfer assets “to pay expenses or meet obligations arising in the ordinary course of business.” In addition, the exchange must create new customer wallets that its international employees cannot access. The deal still needs to be approved by Judge Amy Berman — and won’t settle the SEC lawsuit even if it goes through.
Although we maintain that the SEC’s request for emergency relief was entirely unwarranted, we are pleased that the disagreement over this request was resolved on mutually acceptable terms.
User funds have been and always will be safe and secure on all Binance-affiliated…
— CZ 🔶 Binance (@cz_binance) June 17, 2023
“Because Changpeng Zhao and Binance control the platforms’ client assets and have been able to commingle client assets or transfer client assets at will, as we have argued, these prohibitions are necessary to protect investor assets,” the SEC said. Saturday. “Furthermore, we ensured that US customers can withdraw their assets from the platform as we work to resolve the alleged misconduct and hold Zhao and the Binance entities accountable for their alleged violations of securities laws.”
Zhao commented on the deal on Twitter on Saturday morning. “While we maintain that the SEC’s request for injunctive relief was completely without merit, we are pleased that the disagreement regarding this request was resolved on mutually acceptable terms,” he posted. “User funds have been and always will be safe on all platforms connected to Binance.”
The SEC’s lawsuit against Binance is part of a broader crackdown on the crypto industry. At the end of last year, the agency accused FTX founder and former CEO Sam Bankman-Fried of carrying out an alleged multi-year plan to defraud investors. One day after suing Binance, the SEC filed a complaint against Coinbase, the largest US crypto trading system, alleging that the company was not registered as a broker, national stock exchange or clearinghouse.
