Binance, the world’s largest cryptocurrency exchange, has signed a deal with the United States Securities and Exchange Commission (SEC), which will ensure funds belonging to Binance.US customers stay in the country until the lawsuit filed by the regulator is determined.
The SEC last week, filed an emergency order, requesting the court to freeze assets held under Binance’s US entity, Binance.US. Among the demands the SEC made was the return of assets to the US, Decrypt reported.
Binance Agrees to Asset Repatriation
The ensuing agreement nonetheless culminates in asset return, as Binance has greenlighted that two Binance.US holding entities retain possession, custody, and control of all fiat and crypto assets deposited, held, traded, or accumulated by customers in the United States.
On June 5, the SEC initiated legal proceedings against Binance, its founder and CEO Changpeng Zhao, and the operator of Binance.US, accusing them of fabricating their trading volumes.
Other allegations included misappropriation of customer funds, inadequately restricting access to US customers, and providing misleading information regarding their market surveillance mechanisms.
These lawsuits, along with another one lodged by the SEC against prominent US exchange Coinbase (COIN.O), signified a marked intensification in the regulatory clampdown on the industry by US authorities.
According to communication made by Binance CEO, Changpeng Zhao “CZ” on Friday via Twitter, customer funds will always be a priority to the exchange. He assured that funds “will be safe and secure on all Binance-affiliated platforms.”
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
Binance Agreement With the SEC Burdensome – John Reed Stark
Despite Binance celebrating the development as it temporarily keeps customer funds from being frozen, key experts like John Reed Stark, a renowned cybersecurity consultant who has also worked in the SEC’s Office of Internet Enforcement, it is to a large extent “unprecedented, exhaustive and onerous.”
“This consent order will be one of the most burdensome, awkward, inconvenient, and far-reaching crypto-related orders in SEC history,” Stark in a Twitter he made via Twitter. “The SEC has been given a role akin to a Binance independent consultant, a remedy often granted to the SEC after the SEC prevails in an enforcement action.”
According to a related report by Reuters, the agreement, which does not settle the SEC lawsuit, Binance.US will implement measures to guarantee that no Binance Holdings officials gain access to private keys for its diverse wallets, hardware wallets, or have root access to Binance.US’s Amazon Web Services tools, court documents stated.
In a statement issued on Saturday, the SEC expressed that the emergency relief order obtained for Binance.US customers will safeguard their assets and confirm their ability to continue withdrawing these assets.
“Given that Changpeng Zhao and Binance have control of the platforms’ customers’ assets and have been able to commingle customer assets or divert customer assets as they please…” Gurbir Grewal, director of the SEC’s enforcement division, said in the statement. “These prohibitions are essential to protecting investor assets.”
Still, in the same agreement, Binance has only a 45-day window to submit a comprehensive list of all accounts or wallets it has managed since December 1, 2022. The list will entail all associated financial institutions and their respective account numbers, to the SEC.
Furthermore, Binance is required to disclose a record of asset transfers exceeding $1,000 in value within the same time frame. A host of transaction details will also be submitted such as the recipient names and the rationale behind each transfer.
“Should any Binance defendant violate any provision of this order, US DOJ could step in and file obstruction-related charges,” Stark cautioned “So fail not at your peril, Binance.”
SEC’s Request for Emergency Relief Entirely Unwarranted – Binance Spokesperson
Although Binance agreed to the temporary agreement, which has been called burdensome, the exchange through a spokesperson believes the situation did not warrant the SEC’s request.
In the statement released by Binance on Saturday, “the SEC’s request would have effectively shuttered our business, which is consistent with the agency’s continued attempts to kill the crypto industry by any means, even by making allegations that are not supported by the facts.”
Since the agreement did not settle the case, it leaves Binance in a precarious situation, lacking adequate banking support. Following the lawsuit, several banking partners issued statements regarding their decisions to suspend their relationships with Binance-operated accounts until the court decides on the matter.
Last week, Binance reportedly failed to process approximately 15% of USD withdrawal requests. Binance issued a statement citing limitations posed by its baking partners amid growing fear of a pending asset freeze.
It remains unclear if Binance will be able to regain its market position. The exchange’s market share had plunged to a mere 1% in the US, from about 20% recorded in April, BeInCrypto reported.
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