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Binance strikes deal with SEC to prevent US shutdown after fraud charges

By Nithya Bose in US Business & Employment News, posted June 20, 2023

Binance has negotiated a deal with the Securities and Exchange Commission to continue its US operations and protect customer assets.

Following fraud charges filed against Binance on June 5, the SEC took steps to freeze the exchange's US assets, which its legal team warned would lead to closure in the country.

However, after court-ordered mediation, the SEC and Binance reached a compromise, which Judge Amy Berman Jackson approved on Saturday, June 17.

The customer funds from Binance.US, the affiliate of the larger offshore exchange, will be held in special digital repositories accessible solely by the US exchange.

These funds will not be accessible to Binance's international operation or its founder, Changpeng Zhao.

Binance.US will only be allowed to transfer company assets to cover ordinary business expenses and obligations.

Binance said: "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."

The SEC's Director of Enforcement, Gurbir Grewal, said the US customers could withdraw their assets while the alleged misconduct is addressed.

This agreement marks an important step in the high-stakes legal battle that could shape the future of the crypto industry in the country

The SEC has been aggressive against the industry, targeting Binance and Coinbase, the largest US crypto exchange.

Some crypto companies choose to fight in court, while others consider relocating to countries with more favorable regulations.

Safeguarding customer assets in the US resolves the initial legal dispute, but more legal battles may lie ahead.

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The SEC's civil fraud lawsuit accuses Binance and Changpeng Zhao of mishandling deposits, misleading regulators, and allowing market manipulation on the exchange.

Binance also faces a lawsuit from the Commodity Futures Trading Commission, and Changpeng Zhao is under investigation by federal prosecutors.

During a court hearing, Judge Jackson expressed skepticism over the SEC's approach of using enforcement actions for regulatory oversight in the crypto world.

She encouraged the parties to negotiate a deal to protect customer assets in the United States.

However, the judge dismissed Binance's claim of surprise, as court documents revealed the SEC had been investigating the exchange since 2020.

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