Binance.US and SEC Safeguard Customer Assets Amid Lawsuit

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Binance.US and the US Securities and Exchange Commission (SEC) have come to an agreement that avoids a complete freezing of assets on the cryptocurrency trading platform as the legal case unfolds.

Agreement Reached to Preserve Binance.US Operations Amid SEC Lawsuit

As per the terms of the agreement, Binance Holdings, BAM Management US, BAM Trading Services, and the founder Changpeng “CZ” Zhao are obligated to return customer assets from Binance.US to their rightful owners.

Following recent developments, the platform has undergone restrictions that limit its utilization of corporate assets, with the exception of essential business expenses. Additionally, customers based in the United States have been granted the ability to redeem their funds from the platform. These provisions were outlined in the order presented by US Judge Amy Berman Jackson in the Washington federal court.

The judge’s ruling brings about a resolution that satisfies all parties involved, effectively safeguarding billions of dollars in customer funds without requiring the exchange to cease its operations. At first, the SEC aimed to freeze all assets held by Binance.US, which is under the ownership of Zhao, co-founder of Binance Holdings Ltd.

Amidst its ongoing battle with the SEC’s lawsuit and its steadfast assurance of customer asset security, Binance.US contended that a complete freeze of all funds would inflict significant damage upon its business operations and have adverse consequences for its customers.

Binance.US expressed contentment with the outcome of the resolution, stating their satisfaction with the mutually agreed-upon terms that addressed the SEC’s request. Nonetheless, the platform’s spokesperson emphasized that the demand for freezing assets was entirely unwarranted.

The spokesperson emphasized the safety and security of user funds across all Binance-affiliated platforms, stating that they have been and will continue to be protected.

About the Lawsuit

The SEC’s lawsuit, filed on June 5, accuses Binance and Zhao of mishandling customer funds, deceiving investors and regulators, and violating securities regulations. The SEC specifically demanded the repatriation of cryptocurrencies owned by US customers, a measure typically taken when there is a risk of asset loss or concealment.

One of the allegations in the lawsuit asserts that Binance improperly transferred billions of dollars in customer funds to a bank account controlled by Zhao. These funds were subsequently moved to a third party and appeared to be used for purchasing and selling cryptocurrencies, as stated in the complaint.

The SEC pointed out that Zhao and Binance have consistently mixed customer funds together and have shown a propensity for moving funds outside the jurisdiction of US courts using blockchain technology. This behaviour was emphasized to highlight their disregard for US legal boundaries.

The memorandum also revealed that Binance.US holds customer assets valued at more than $2.2 billion. Additionally, Zhao, being a foreign national, has made public statements asserting his exemption from the jurisdiction of US courts.

Innovative Approach to Resolve SEC’s Case Against Binance

In a document referred to as the “Proposed Stipulation and Consent Order,” an agreement has been reached that allows Binance.US to maintain its operations without any disruptions during the ongoing legal proceedings.

This agreement also emphasizes the separation of Binance Holdings and Binance.US (legally known as BAM Trading), eliminating any purported links between the two entities. Furthermore, the agreement includes provisions for the return of assets that originated from the US and may have been moved overseas.

To provide immediate relief to Binance.US customers during the litigation process, the agreement incorporates an emergency asset provision. This provision allows customers to access and withdraw their funds from the platform.

Binance.US will assume sole responsibility for overseeing the funds, while stringent measures will prevent Binance Holdings officials from accessing wallets, private keys, and Amazon Web Services tools belonging to Binance.US.

The agreement further requires Binance.US to transfer all customer funds into newly created wallets accessible only by its employees. Furthermore, Binance.US is authorized to utilize the funds necessary for essential day-to-day operations.

The agreement aims to expedite the legal proceedings in the SEC’s case against the Binance exchange by compelling all defendants to provide quick discovery and sworn testimony. This unique approach effectively shortens the timeline for reaching a resolution, bringing a glimmer of hope to industry players who were concerned about lengthy legal conflicts with regulatory authorities.

Notably, Judge Jackson, overseeing the Binance-SEC case, will also deliver preliminary rulings on whether specific cryptocurrencies should be classified as securities.

Tokens such as Cardano, Solana, Polygon, and BNB, among others, have been listed by the SEC as securities in its cases against Binance and Coinbase. The outcome of these preliminary judgments carries far-reaching implications for the US crypto industry.