The Securities and Exchange Commission reached an agreement with Binance late Friday that would allow the world’s largest cryptocurrency exchange to continue operating in the United States and safeguard client assets while the company fights a government lawsuit. .
After filing fraud charges against Binance on June 5, the SEC moved to freeze the company’s US assets in a move that lawyers for the exchange say would put it out of business in the United States.
But in a court filing on Friday, the SEC said the two sides had reached a compromise after several days of court-ordered mediation. On Saturday morning, Judge Amy Berman Jackson, who is overseeing the case in federal court in Washington, signed the agreement.
Under the deal, funds belonging to clients of Binance.US, an affiliate of the company’s largest offshore exchange, would go to special digital repositories accessible only to the US exchange, and not to Binance’s international operation or its founder. , Changpeng Zhao. The agreement stipulates that Binance.US may transfer company assets “solely to make payments for expenses or to satisfy obligations incurred in the ordinary course of business.”
Binance said on Saturday: “While we maintain that the SEC’s emergency relief request was completely unjustified, we are pleased that the disagreement over this request was resolved on mutually agreeable terms.”
SEC chief enforcement officer Gurbir Grewal said in a declaration on Saturday, “We are ensuring that US clients can withdraw their assets from the platform while we work to resolve the alleged underlying misconduct.”
The dispute over Binance assets was part of a high-stakes legal battle that could determine the future of the crypto industry in the United States.
In recent months, the SEC has embarked on an aggressive crackdown on the industry, suing Binance and its biggest US rival, cryptocurrency exchange Coinbase. With regulatory pressure intensifying, some cryptocurrency firms have vowed to fight it out in court, while others are exploring options outside the United States and moving to countries with more lenient regulations.
The agreement to safeguard clients’ assets in the United States would settle the first of many legal skirmishes to come. The SEC, in a broad civil fraud lawsuit, accused Binance and Mr. Zhao of mismanaging customer deposits, lying to regulators, and allowing market manipulation to proliferate on the exchange.
In court filings, the SEC said an asset freeze was necessary to ensure Binance did not jeopardize user funds or seek to move money abroad. But the company said the SEC’s proposal was too punitive and would prevent the company from paying employees and vendors, causing its operations to “quickly come to a halt.”
Binance was also sued earlier this year by the Commodity Futures Trading Commission, and federal prosecutors are investigating Mr. Zhao. The company has argued that the SEC is being 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 litigation in Washington.
At a court hearing in Washington on Tuesday, Judge Jackson expressed some skepticism about the SEC’s strategy of using enforcement actions to impose regulatory oversight on the world of cryptocurrencies. He called the approach “inefficient and cumbersome” and is one of the reasons he urged the parties to negotiate an agreement on the protection of clients’ assets in the United States.
But Judge Jackson also played down Binance’s argument that it was surprised by the aggressiveness of the SEC.
According to court documents, the SEC has been investigating Binance since 2020. “Some of the surprise expressed in the allegations rang a little hollow,” he told Binance’s lawyers on Tuesday.