Binance reaches deal with government to avoid US shutdown
The Securities and Exchange Commission reached a deal with Binance late Friday that will allow the world’s largest cryptocurrency exchange to continue operating in the United States and safeguard client assets while the company pursues a lawsuit against the government.
After filing allegations of fraud against Binance on June 5, the SEC decided to freeze the company’s US assets. According to the lawyers of the stock exchange, it would go bankrupt in the United States.
But in a court filing Friday, the SEC said the two sides reached a compromise after several days of judicial mediation. The deal must be approved by Judge Amy Berman Jackson, who oversees the case in Washington federal court.
Under the agreement, funds from Binance.US clients would go to dedicated digital repositories accessible only to the US exchange – and not Binance’s larger international operation, or its founder, Changpeng Zhao. The deal stipulates that Binance.US may transfer company assets “solely to make payments for expenses or to fulfill obligations incurred in the ordinary course of business.”
Lawyers from Binance.US, a subsidiary of the company’s larger offshore exchange, did not immediately respond to a request for comment.
In a statement on Saturday, the SEC’s director of enforcement, Gurbir Grewal, said: “We have ensured that U.S. clients can withdraw their assets from the platform as we work to resolve the alleged underlying misconduct.”
The dispute over Binance’s assets was part of a high-stakes legal battle that could shape the future of the crypto industry in the United States.
In recent months, the SEC has begun an aggressive crackdown on the industry, suing both Binance and its biggest US rival, crypto exchange Coinbase. As regulatory pressure mounts, some crypto companies have vowed to fight in court, while others are exploring options outside the United States and moving to countries with more lenient regulations.
The agreement to protect customer assets in the United States would settle the first of what could be many more legal skirmishes. The SEC accused Binance and Mr. Zhao in a sweeping civil fraud case of mishandling customer deposits, lying to regulators and allowing market manipulation to spread on the exchange.
In lawsuits, the SEC said an asset freeze was necessary to ensure that Binance would not put user funds at risk or attempt to move funds abroad. But the company said the SEC’s proposal was overly punitive and would prevent the company from paying employees and suppliers, bringing its business to a “quick halt.”
Binance was also charged by the Commodity Futures Trading Commission earlier this year, and Mr. Zhao is under investigation by federal prosecutors. The company has argued that the SEC is unreasonable in going after the company and its founder. Four major law firms are representing Binance and Mr. Zhao, better known as CZ, in the Washington lawsuit.
At a court hearing in Washington on Tuesday, Judge Jackson expressed some skepticism about the SEC’s strategy of using enforcement action to impose regulatory oversight on the crypto world. She called the approach “inefficient and cumbersome” and it is one of the reasons why she urged the parties to negotiate protecting the assets of clients in the United States.
But Judge Jackson also debunked Binance’s argument that he was surprised by the SEC’s aggressiveness
According to court documents, the SEC has been investigating Binance since 2020. “Some of the astonishment expressed in the pleas rang a little hollow,” she told Binance’s lawyers on Tuesday.