New York June 18 2023: Binance.US and the US Securities and Exchange Commission reached an agreement that avoids a total asset freeze at the cryptocurrency trading platform while the regulator’s suit against it proceeds.
Under the pact announced Saturday, Binance Holdings, BAM Management US, BAM Trading Services and founder Changpeng “CZ” Zhao will repatriate Binance.US customer assets. Binance.US is prohibited from spending corporate assets other than to cover the costs of running its business and US customers are permitted to redeem from the platform, according to the order filed by US judge Amy Berman Jackson in Washington federal court.
The decision by the judge finalized an agreement struck between the parties to protect billions of dollars in customer funds without shutting the exchange down. The SEC had originally sought a total asset freeze at Binance.US, the trading platform owned by Binance Holdings Ltd. co-founder Zhao. Binance.US, which is fighting the SEC’s suit and says customer assets are safe, argued that blocking the flow of all funds would cripple its business and hurt customers.
Binance.US on Saturday said it was “pleased” that the disagreement over the SEC’s request was resolved on mutually acceptable terms, though it maintains that the call for a freeze was “entirely unwarranted,” according to a spokesperson.
“User funds have been and always will be safe and secure on all Binance-affiliated platforms,” the spokesperson said.
In its June 5 lawsuit, the SEC accused Binance and Zhao of mishandling customer funds, misleading investors and regulators, and breaking securities rules. It also asked for the repatriation of crypto belonging to US customers — a request made only when there is a risk assets may be lost or concealed.
Among the allegations in the lawsuit, the SEC claims Binance improperly moved billions of dollars of customer funds to a bank account for an entity controlled by Zhao. Those funds were transferred to a third party and then appeared to be used to purchase and sell crypto, according to the complaint.
In a memorandum, the SEC said “Zhao and Binance have a pattern and practice of commingling customer funds” as well as “moving funds outside of the US and/or on the blockchain where they are outside of this court’s reach.”
The memorandum said Binance.US customer assets total over $2.2 billion and described Zhao as “a foreign national who has made overt his views that he is not subject to the jurisdiction of this court.”
