The Binance.US and SEC Deal

Updated: 18 June 2023

Disclosure

Don’t invest unless prepared to lose all the money you invest. This is a high-risk investment, you shouldn’t expect to be protected if something goes wrong.

Join Our Telegram channel to stay up to date on breaking news coverage

A former SEC official has referred to a recently agreed upon deal between Binance.US and the Securities and Exchange Commission (SEC) as ‘burdensome.’ This morning, it was revealed that the exchange will avoid a freeze on its assets by offering greater transparency and oversight, in accordance with a court-approved consent order. The US District Judge, Amy Berman Jackson, was the signatory on this order.

This development is subsequent to an emergency order placed by the SEC last week, seeking the freezing of assets under the control of Binance.US holding companies, as well as the return of assets to American soil. While the newly agreed upon terms do still lead to asset repatriation, Binance.US holding entities have been mandated to maintain control, custody, and possession of all crypto and fiat currency assets in the US.

Changpeng “CZ” Zhao, CEO of Binance, publicly addressed this matter on Twitter this morning, reassuring his customers of the safety and security of their funds on Binance-related platforms. He went on to express his relief at resolving the dispute over the SEC’s emergency relief request on agreeable terms, despite maintaining it was uncalled for.

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.

User funds have been and always will be safe and secure on all Binance-affiliated…

— CZ 🔶 Binance (@cz_binance) June 17, 2023

The unprecedented nature of the agreement, described by John Reed Stark, a cybersecurity consultant and the former head of the SEC Office of Internet Enforcement, stems from its exhaustive and rigorous obligations. Stark noted that this could be one of the most challenging, inconvenient, and impactful crypto-related orders the SEC has ever sanctioned, likening the SEC’s role to that of an independent Binance consultant.

A list of all wallets and accounts managed by Binance since December 1, 2022, has to be handed over to the SEC within a 45-day period as per the agreement. Alongside this, details of financial institutions and account numbers connected to Binance, as well as records of asset transfers exceeding $1,000 in the same timeframe, are to be provided. Furthermore, the agreement calls for disclosure about any potential restrictions on assets that could hinder their transfer or withdrawal by customers.

The agreement bars Binance and its CEO, Changpeng Zhao, from accessing or controlling Binance.US assets. It also requires the submission of monthly reports to the SEC on Binance.US’s routine business expenses.

While the SEC’s civil action against Binance.US is progressing, Judge Jackson has allocated a 90-day period for expedited discovery by the SEC. As Stark noted, if Binance.US were to violate the order’s terms, the US Department of Justice could potentially charge them with obstruction-related offenses.

Troubles with the SEC

As we have previously reported, the SEC sued Binance.US and Changpeng Zhao, the company’s creator, in June. They claim in the lawsuit that the company used “a web of lies” to get around the established securities regulations; as a result, Binance.US has stepped up its defense.

Following the lawsuit, according to a member who requested to remain unnamed due to the sensitive nature of the situation, Binance.US has fired over 50 workers, including staffers from its legal, compliance, and risk departments.

Furthermore, the SEC had earlier urged the court to halt Binance.US‘s financial operations due to the possibility of financial distribution. The judge, however, dismissed the plea earlier this week, declaring that a negotiated settlement was in the best interests of