Binance and the Government Reach an Agreement to Prevent a U.S. Shutdown

Binance and the Securities and Exchange Commission came to an agreement that would keep the exchange operational while it defends itself against a fraud action.

Binance and the Securities and Exchange Commission came to an agreement late Friday that would allow the biggest cryptocurrency exchange in the world to continue operating in the country while protecting customer assets while the business fights a government lawsuit.

The S.E.C. attempted to freeze the company’s U.S. assets after charging Binance with fraud on June 5, a move that the exchange’s attorneys claimed would force the company out of business in the country.

The SEC, however, claimed that the two parties had come to an agreement following several days of court-ordered mediation in a court filing on Friday. The agreement was approved by the case’s administrative judge, Amy Berman Jackson, on Saturday morning in federal court in Washington.

According to the agreement, money belonging to customers of Binance.US, a subsidiary of the company’s bigger offshore exchange would be placed in exclusive digital vaults that were only accessible to the U.S. exchange — not to Binance’s global business or its founder, Changpeng Zhao. The agreement states that Binance.US may transfer corporate assets « solely to make payments for expenses or to satisfy obligations incurred in the ordinary course of business. »

On Saturday, Binance stated,

« Although we maintain that the S.E.C.’s request for emergency relief was entirely unwarranted, we are pleased that the disagreement over this request was resolved on mutually acceptable terms. »

Gurbir Grewal, the head of enforcement at the Securities and Exchange Commission, said in a statement on Saturday that « we ensured that U.S. customers will be able to withdraw their assets from the platform while we work to resolve the alleged underlying misconduct. »

A high-stakes judicial fight that may decide the fate of the cryptocurrency sector in the United States included the disagreement over Binance’s assets.

The S.E.C. launched an aggressive industry crackdown recently, suing Coinbase, the largest rival cryptocurrency exchange in the United States, as well as Binance. In response to mounting governmental pressure, some cryptocurrency businesses have promised to litigate, while others are looking at possibilities outside of the United States, including leaving for nations with laxer rules.

The first of potentially many legal conflicts would be settled by the agreement to protect consumer assets in the US. In a broad civil fraud case, the SEC accused Binance and Mr. Zhao of processing consumer deposits improperly, misrepresenting to authorities, and allowing market manipulation to flourish on the exchange.

The Securities and Exchange Commission (S.E.C.) said in court documents that an asset freeze was required to make sure Binance didn’t risk user cash or attempt to shift money outside. The company, however, claimed that the S.E.C.’s suggestion was unduly harsh and would prevent it from paying its staff and vendors, which would « quickly grind to a halt » its activities.

Furthermore, Mr. Zhao is the subject of a federal investigation, and Binance was sued earlier this year by the Commodity Futures Trading Commission. In pursuing the firm and its creator, the S.E.C. is, according to the corporation, acting in an unfair manner. In the case in Washington, Mr. Zhao, also known as C.Z. and Binance are being defended by four renowned legal firms.

At a court proceeding in Washington on Tuesday, Judge Jackson voiced some doubt over the S.E.C.’s approach of employing enforcement proceedings to impose regulatory control on the cryptocurrency industry. She criticized the strategy as « inefficient and burdensome, » which is one of the reasons she pushed the parties to seek a settlement on protecting client assets un the United States.

Judge Jackson, however, also paid scant attention to Binance’s claim that it was taken aback by the SEC’s aggressivity.

Court documents state that the S.E.C. has been looking into Binance since 2020. She said to Binance’s attorneys on Tuesday that some of the astonishment that was conveyed in the filings « rang a little hollow. »

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