The Securities and Exchange Commission and Binance have come to an agreement that will allow the cryptocurrency exchange to continue operating in the US until a lawsuit filed by the SEC earlier this month is resolved. The regulator sued Binance and founder Changpeng Zhao, better known as CZ, on June 5th, alleging the company had artificially inflated trading volumes, mixed and diverted customer assets and failed to restrict US investors from trading on Binance.com when they were supposed to stay on a separate US system.
After announcing the charges, the SEC sought to freeze Binance’s US assets. The regulator said the move was necessary to protect customer funds and prevent the company from potentially moving money abroad. Binance, meanwhile, argued an asset freeze would put it out of business in the US. On Tuesday, the judge overseeing the litigation ordered the two sides to come to a compromise that would safeguard customer assets.
In a court filing seen by The New York Times, the SEC said Friday that Binance had agreed to move all assets belonging to US customers stateside. Additionally, the company’s US operation is prohibited from providing access or control of domestic assets or funds to Binance’s international operation or Zhao. Until the ligation is resolved, Binance.US is “solely” allowed to transfer assets “to make payments for expenses or to satisfy obligations incurred in the ordinary course of business.” Additionally, the exchange is required to create new customer wallets which its international employees can’t access. The deal still needs approval from Judge Amy Berman – and won’t resolve the SEC lawsuit even if it’s put in place.
“Given that Changpeng Zhao and Binance have control of the platforms’ customers’ assets and have been able to commingle customer assets or divert customer assets as they please, as we have alleged, these prohibitions are essential to protecting investor assets,” the SEC said Saturday. “Further, we ensured that US customers will be able to withdraw their assets from the platform while we work to resolve the alleged underlying misconduct and hold Zhao and the Binance entities accountable for their alleged securities law violations.”
Zhao took to Twitter on Saturday morning to comment on the deal. “Although we maintain that the SEC’s request for emergency relief was entirely unwarranted, we are pleased that the disagreement over this request was resolved on mutually acceptable terms,” he posted. “User funds have been and always will be safe and secure on all Binance-affiliated platforms.”
The SEC’s lawsuit against Binance is part of a broader crackdown by the watchdog against the crypto industry. At the end of last year, the agency accused FTX founder and former CEO Sam Bankman-Fried of carrying out an alleged multi-year scheme to defraud investors. One day after suing Binance, the SEC filed a complaint against Coinbase, the largest crypto trading platform in the US, alleging the company had failed to register as a broker, national securities exchange or clearing agency.