Court orders SEC and Binance.US to seek compromise without freezing assets

SEC and Binance.US must reach an agreement to safeguard client assets with the platform able to continue operating normally. The court issued the order in response to the regulator’s motion.

UPDATE: The judge ordered Binance & the U.S. Securities and Exchange Commission to try to reach an agreement to secure the U.S. assets but allow Binance to continue operating as usual, which the company said a freeze would not allow. Binance must file a list of business expenses. https://t.co/jJUrDybaIH

— Katie Buehler (@bykatiebuehler) June 13, 2023

The American arm of the bitcoin exchange is due to present a list of business expenses by noon on June 15 local time.

The SEC filed a motion to freeze the digital assets held by Binance.US. Binance CEO Changpeng Zhao clarified that such actions, if approved by the court, would apply only to the U.S. subsidiary, not the international exchange.

On June 12 Binance.US opposed the Commission’s emergency motion, calling it “draconian and unduly burdensome.”

According to journalist Katie Buehler, the judge did not issue a ruling on the regulator’s request to freeze the platform’s assets. She noted that the parties should come to an agreement on their own.

NOTE: The judge HAS NOT ruled one way or the other on the motion to freeze assets, but she said she’d rather have the parties come to an agreement on their own. She asked for a status report on the negotiations by Thursday afternoon.

— Katie Buehler (@bykatiebuehler) June 13, 2023

According to Bloomberg, the judge noted that the two sides “not that far apart” on ways to protect client funds. She referred them to a magistrate to work out a compromise. If a positive ruling, there will be no need to rule on the SEC’s motion.

During the hearing, a representative of Binance.US noted that the exchange should have the ability to finance ordinary expenses, while asset freezes could be “misinterpreted by banks”.

“A full shutdown would have significant consequences not only for the company, but for crypto markets as a whole”, the judge agreed.

Binance.US lawyers proposed to the SEC as a compromise to move American clients’ assets to new wallets with new private keys, which would be under the exclusive control of platform staff based in the United States.

The platform pledged not to move assets or make payments to any entity within the Binance structure without a court order.

In its compromise proposal, the SEC asked Binance to repatriate cryptocurrencies owned by US clients, where they would be under control of entities independent from the parent company.

During the hearing, one of the Commission’s lawyers said the regulator was open to a “narrowly tailored carve-out” from any freeze to cover the platform’s operating expenses.

Earlier on June 5, the SECfiled a lawsuit against Binance and Zhao. The agency brought 13 charges, including selling unregistered securities. 

In response, the company issued a statement, in which it said it was ready to “vigorously defend itself”.

Later, Binance.US announced a halt to dollar deposits and urged customers to withdraw fiat funds by June 13.