Reports suggest that Binance.US and the US Securities Exchange Commission (SEC) may reach an agreement that could prevent a complete freeze of assets. The federal judge overseeing the U.S. Securities and Exchange Commission’s case against Binance and Binance.US has refused to issue a temporary restraining order that freezes the U.S. trading platform’s assets. Here are the details…
No need for Binance.US to freeze assets
As we reported on Kriptokoin.com, the SEC first filed a criminal complaint against Binance.US and related companies on June 5th. He then demanded a restraining order and an asset freeze on 8 June. Despite the SEC’s initial order calling for Binance.US’ funds to be frozen and repatriated, Judge Amy Berman Jackson said at a recent hearing that a complete freezing of funds would have “significant consequences.” Jackson said he would not approve an asset freeze until both parties reach a settlement agreement with a magistrate.
This will allow the US arm of the company to continue doing business as it resolves restrictions with the regulator. If the two sides can agree on boundaries, DC District Court Judge Amy Berman Jackson said there was “absolutely no need” for a restraining order. Meanwhile, the judge ordered Binance.US to submit a list of business expenses to the court and the parties to continue negotiations. A status update is expected by the end of business on Thursday.
In a packed Washington courtroom, a judge pressed SEC lawyers over requests to freeze all of the company’s assets until it proved that no one from Binance’s global platform, including Changpeng “CZ” Zhao, had access to its private keys. The judge seemed at times disappointed by the responses he heard when asking whether any Binance.US client funds had actually left the US, after multiple SEC lawyers said they were concerned about the fact that Binance’s global platform was controlling enough private key bits to move the funds. “I want to know if that’s the case. It’s surprising that I’m asking each and every one of you that.” said.
Why was such a decision made?
Earlier in the day, the judge said that Binance may be inclined to impose some form of restriction on its access to Binance.US assets. But he hinted that he would not order a full ban. Therefore, he ordered companies to compromise and compare what they propose instead of a restraining order. “We welcome the business to continue operating,” Jennifer Farer, an SEC attorney, told the judge on Tuesday. Binance.US representatives, on the other hand, said they mainly wanted normal operating expenses to be allowed and were “not willing to accept the death penalty” represented by a complete freeze of their assets.
Farer said that from Binance.US telling the SEC that it has a deal with Binance, to saying the deal is non-operational, to saying the non-operational deal has been suspended, Binance.US is constantly changing its story about how its crypto assets and funds are held. The attorney said that Binance.US has also told the SEC that it may stop doing business in the US, prompting the need for an urgent order.
“There is a back and forth on whether they should be shut down,” Farber said. Judge Jackson said, however, that at the end of the day, the parties were not that far apart. If they can come to an agreement, this will give all parties time to properly work out the details of the case. The SEC, along with Binance founder Changpeng “CZ” Zhao, sued Binance and Binance.US last week, alleging that they operate as an unregistered stock exchange, brokerage and clearinghouse. The regulator also claimed that the funds were heavily involved in allowing Zhao, a Canadian citizen living in the UAE, to access Binance.US client assets.
Securities and commodity issues
The SEC followed suit with a motion for a temporary restraining order. Crypto exchanges disputed the allegations in their response to the motion, arguing that the SEC has not conclusively proven that they are listing any securities, and that the regulator has not shown any evidence to support an immediate action. Judge Jackson also addressed the fundamental question at the heart of the case: What makes a crypto asset a security, and is it a commodity if not a security? Although the judge asked some basic questions on the matter, he was not satisfied with the answers.
Near the opening of the trial, the judge asked SEC lawyers to distinguish between “crypto-asset” and “crypto-asset security.” SEC attorney Matthew Scarlato told the judge that the regulator gave several examples of cryptos he believed to be securities in the broader complaint, but also reserved the right to evaluate other tokens on exchanges later.
The judge asked the SEC (and later Binance) whether other cryptocurrencies are commodities. “What are you not calling securities?” he asks, diving into the heart of a problem that has plagued the crypto industry for years. He then asked Matthew Martens, an attorney representing Binance.US, whether BNB is a commodity as the company argues it is a security. “This is a crypto,” Martens said. Interested parties have also submitted a modified order that will allow BAM Trading and BAM Management, parent companies of Binance.US, to retain control of user fiat and crypto assets solely for the purpose of facilitating client redemptions. The order will also allow BAM companies to pay their usual business expenses; The SEC or the court will decide specific details about this in the future.
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