14-6-2023 (WASHINGTON) Binance.US and the US Securities and Exchange Commission (SEC) are actively working towards a deal to prevent a complete freeze of assets on the cryptocurrency trading platform. The SEC has accused Binance of operating unlawfully, and US District Judge Amy Berman Jackson stated that the two parties are not far from reaching an agreement to protect billions of dollars in customer funds while the lawsuit proceeds.
During a hearing in Washington on Tuesday, Judge Jackson referred the matter to a magistrate judge to facilitate a compromise agreement. The parties are expected to submit a status update by Thursday.
Judge Jackson remarked that the intricate details are better handled by the involved parties themselves, eliminating the need for her to rule on the SEC’s request for a temporary restraining order.
Last week, the SEC filed charges against Binance and its US affiliate, accusing them of mishandling customer deposits and providing false information to regulators. The SEC also sought to freeze Binance’s US assets, a move that Binance argued would result in a shutdown of its operations in the United States.
During the hearing, Judge Jackson expressed skepticism regarding the SEC’s enforcement powers in regulating the crypto industry, deeming it “inefficient and cumbersome.”
These actions against Binance are part of an increasingly rigorous regulatory crackdown on the cryptocurrency sector. Following the lawsuit against Binance, the SEC also sued Coinbase, the largest US exchange, for engaging in transactions involving unlicensed securities. These consecutive moves have sent shockwaves through the industry, raising concerns about a protracted legal battle over the future of cryptocurrencies in the United States.
Since November, scrutiny of the crypto industry has intensified following the abrupt collapse of the FTX exchange, which resulted in criminal charges against its founder, Sam Bankman-Fried.
The attempt to freeze Binance’s US assets marks one of the most aggressive measures taken by the SEC against cryptocurrency companies. While previous actions have led smaller crypto firms to pay fines or discontinue certain products, a victory against Binance could force the world’s largest exchange to completely exit the US market, further accelerating the growing exodus of companies.
In court filings on Monday, Binance’s American arm, Binance.US, argued that the proposed asset freeze by the SEC would prevent the company from paying vendors, employees, and suppliers, leading to an abrupt halt in operations.
“We’re not willing to accept a death penalty eight days into the case,” stated a lawyer representing Binance.US during the hearing.
According to the SEC, Binance.US oversees approximately US$2.2 billion (S$2.96 billion) in cryptocurrency holdings. However, the asset freeze would not impact the company’s larger global exchange, which is already prohibited from operating in the United States.
Last week, the SEC revealed that it has been investigating Binance since the summer of 2020. A few months ago, regulators informed Binance that they were considering taking enforcement action against the company. After the SEC filed the lawsuit against Binance, Binance.US announced that its banking partners would no longer provide crucial payment channels, leading to the suspension of trading in US dollars.
In court documents, the SEC stated that none of its actions should have come as a surprise to Binance and its CEO Zhao Changpeng, who is also named in the lawsuit. The SEC alleged that the defendants were aware of the illegal nature of their activities involving US investors and the risk of facing enforcement actions by the US government. Instead of ceasing such activities, the SEC claimed that Zhao and Binance persisted in their actions.
