Binance.US and the United States Securities and Exchange Commission (SEC) have reached a compromise that avoids the freezing of the exchange’s assets. On Saturday, US Judge Amy Berman Jackson approved an agreement between the two parties, dismissing the previous temporary restraining order (TRO) that sought to freeze all Binance.US assets.
According to the terms of the agreement, Binance Holdings, BAM Management US, BAM Trading Services, and founder Changpeng “CZ” Zhao will repatriate Binance.US customer assets. Additionally, Binance.US is prohibited from using corporate assets except for covering business expenses, while US customers are permitted to redeem funds from the platform.
One significant aspect of the deal is the ban on Binance Global from accessing private keys of wallets, hardware wallets, or root access to Binance.US’s Amazon Web Services tools. This provision aims to enhance the security and protection of customer assets held on the platform.
In response to the court’s decision, Binance.US expressed satisfaction on Twitter, stating, “We are pleased to inform you that the Court did not grant the SEC’s request for a TRO and freeze of assets on our platform, which was clearly unjustified by both the facts and the law.” The SEC had requested an asset freeze for Binance.US as part of its ongoing lawsuit against the company and its founder, Changpeng Zhao.
The SEC’s complaint accuses Binance and Zhao of mishandling customer funds, misleading investors and regulators, and violating securities regulations. Furthermore, the commission alleges that Binance improperly transferred billions of dollars of customer funds to a bank account controlled by Zhao, which were then used for cryptocurrency trading.
During a hearing on Tuesday, Binance.US, while contesting the SEC’s lawsuit and emphasizing the safety of customer assets, argued that a complete freeze of funds would harm business operations and ultimately impact customers.
In its proposal to the SEC, Binance suggested a compromise involving the transfer of US customer cryptoassets to new wallets with new private keys under the exclusive control of US-based officers at Binance.US. The exchange also requested permission to continue paying employees and covering operational costs, with the assurance that no assets would be transferred or used to benefit any Binance entity without a judge’s order.
US District Judge Amy Berman Jackson recognized the potential consequences of shutting down the platform entirely, stating that it would not only impact the company but also have significant implications for the digital asset markets as a whole.
However, cybersecurity consultant and former chief of the SEC Office of Internet Enforcement, John Reed Stark, expressed his concern about the agreement, calling it “the most burdensome, awkward, inconvenient, and far-reaching crypto-related orders in SEC history.” He cautioned that any violation of the agreement by Binance could lead to obstruction-related charges being filed by the US Department of Justice.
The compromise reached between Binance.US and the SEC allows the exchange to resume operations and ensures the repatriation of customer assets. As both parties continue to navigate the legal proceedings, the outcome of this case will be closely watched by the cryptocurrency community and the wider financial industry.
