U.S. Judge Denies Binance.US Asset Freeze For Now

Updated: 14 June 2023

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Federal judge Amy Berman Jackson has declined to impose a temporary injunction that would have frozen Binance.US assets.

Despite a plea by the United States Securities and Exchange Commission to freeze Binance.US assets, Judge Amy Berman, who is in charge of the case, has decided not to impose a temporary restraining order that would have frozen Binance’s trading platform in the United States.

Reportedly, U.S. District Judge Amy Berman Jackson directed the two groups to a magistrate judge on June 14 to work on a compromise agreement that would preserve customer assets without shutting down the exchange.

“The nitty-gritty of it is better handled by you than by me,” said Judge Amy.

According to the judge, if an agreement is reached, she won’t have to decide on the SEC’s urgent request to freeze cash.

On June 6, the oversight body submitted an urgent motion to seize the assets of BAM Management and BAM Trading. The two companies oversee Binance’s business activities and Binance, a worldwide exchange over which the SEC lacks authority.

Binance.US sought the judge’s denial of the SEC’s attempt to seize assets valued at billions of dollars on the platform. According to representatives of Binance.US, they were not willing to accept the lawsuit posed by a complete asset freeze, and their major concern was being allowed to incur typical operating costs.

Binance.US Lawsuit – Why Judge Said No

The SEC filed a lawsuit against Binance, accusing Changpeng Zhao, the CEO, of mismanaging customers’ cash, deceiving investors and regulators, and breaking security laws.

The regulator claimed Zhao transferred $12 billion from Binance through Merit Peak, a company he owned and controlled.

Binance.US and Zhao both denied the claims that they wasted any money in a joint memo presented on June 12 before the hearing on the restraining order. They asserted that the SEC was unable to identify a single instance of money taken from clients of Binance.US.

Binance.US claims the petition is motivated by “SEC staff obtaining an advantage in litigation versus genuine concern about the safety of customer assets.”

During yesterday’s session, one of Binance’s lawyers stated, “We are not willing to accept the death penalty eight days into our case.”

He further argued that a shutdown of the exchange would significantly impact operational costs, such as salaries, rent, and vendors. He also voiced concern that banks could misconstrue an asset freeze.

In an attempt to settle the disagreement, Judge Amy asked if any funds from Binance were involved but sounded exasperated by the answers. Several SEC lawyers expressed their main concern about the availability of sufficient private key shards on Binance’s worldwide platform to transfer payments.

According to the judge, there was “absolutely no need” for a restraining order if the SEC and Binance.US lawyers could agree on the boundaries. Thanks to this, all sides would have enough time to review the case’s specifics. Also requested by Judge Jackson was a list of Binance.US’s business expenses.

What Is the Motive Behind SEC Lawsuit

The SEC is suing Binance for exceptional relief, including an asset freeze that would return billions of dollars. According to the U.S. regulator, there is ample proof of fraud. Freezing the exchange’s funds would allay the SEC’s worries that Binance’s customer cash is in danger.

As a result, the case is still moving quickly, and it is unusual for the SEC to request immediate relief against such a major organization as Binance.

According to John Reed Stark, a former director of the SEC’s Office of Internet Enforcement, the June 14 hearing is the organization’s most important cryptocurrency enforcement action to date.

SEC/Binance Newsflash

The Judge in the SEC/Binance matter just issued a new order, clearly trying to broker a compromise with a temporary consent decree pertaining to Binance-related assets in the U.S. (see graphic). This would allow everyone time to prepare for a full-fledged… pic.twitter.com/w4NSW9eE3A

— John Reed Stark (@JohnReedStark) June 13, 2023