The Securities and Exchange Commission reached a deal with Binance late Friday, allowing the world’s largest cryptocurrency exchange to continue operating in the U.S. and to protect customer assets while the company contests a government lawsuit.
After accusing Binance of fraud on June 5, the SEC decided to freeze its U.S. assets, arguing that Binance would go out of business in the U.S., the exchange’s lawyers said.
But in a court filing Friday, the SEC said the two sides reached a compromise after days of court-ordered arbitration. The deal is subject to approval by Judge Amy Berman Jackson, who is overseeing the case in federal court in Washington.
Under the agreement, funds belonging to Binance.US customers will be stored in a special digital repository accessible only to US exchanges and inaccessible to Binance’s larger international operations and its founder, Changpeng Zhao. Become. The agreement stipulates that Binance.US may transfer company assets “only to pay expenses or meet obligations arising in the ordinary course of business.”
A lawyer for Binance US, an affiliate of the company’s major offshore exchange, did not immediately respond to a request for comment.
of statement SEC Executive Director Garbir Gulwal said on Saturday, “We have ensured that U.S. customers will be able to withdraw assets from the platform while we work to resolve allegations of underlying illegal activity.”
The dispute over Binance assets was part of a high-stakes legal battle that could decide the future of the U.S. cryptocurrency industry.
In recent months, the SEC has launched an aggressive industry crackdown, suing not only Binance, but also its biggest U.S. rival, cryptocurrency exchange Coinbase. As regulatory pressure mounts, some cryptocurrency firms have vowed to take their cases to court, while others are exploring options outside the U.S. and moving to countries with less stringent regulations.
An agreement to protect client assets in the U.S. would be the first solution to many legal skirmishes to come. In a broad civil fraud lawsuit, the SEC has charged Binance and Mr. Chao with mishandling customer deposits, lying to regulators and allowing widespread market manipulation on exchanges.
In a court filing, the SEC said the asset freeze was necessary to prevent Binance from putting user funds at risk or trying to move them overseas. But the company said the SEC’s proposal would be overly punitive and would prevent it from paying its employees and vendors and “quickly bring it to a halt.”
Binance was also sued by the Commodity Futures Trading Commission earlier this year, and Zhao is under investigation by federal prosecutors. The company argues that it is unreasonable for the SEC to pursue companies and their founders. Four major law firms are representing Mr. Chao, better known as Binance and CZ, in the Washington lawsuit.
At a court hearing in Washington on Tuesday, Judge Jackson expressed some skepticism about the SEC’s strategy to use enforcement action to impose regulatory oversight on the cryptocurrency world. He called the approach “inefficient and cumbersome,” which is one of the reasons he is urging the parties to negotiate an agreement to protect client assets in the United States.
But Judge Jackson also lightly dismissed Binance’s claim that it was surprised by the SEC’s aggressiveness.
The SEC has been investigating Binance since 2020, according to court filings. “Some of the surprise expressed in the petition sounded a little hollow,” she told Binance lawyers on Tuesday.
