Binance. US crypto exchange is avoiding asset freezes that would incapacitate its business operations. The US subsidiary of Binance avoided the asset freeze to sustain the business by agreeing to the burdensome conditions.
The agreement provides that Binance US will retain operations during the civil case proceedings initiated by the US Securities and Exchange Commission (SEC), alleging the crypto exchange evaded critical regulatory oversight.
Consent Order Saves Binance.US From Looming Assets Freeze
The consent order reached on Saturday, June 17, obligates Binance.US to repatriate the assets holdings of domestic clients. The order directs the repatriated assets to benefit the local customers. The domestic customers would retain them under the custody of domestic personnel.
The consent order prevents Binance Holdings and its chief executive Changpeng Zhao from accessing the funds. Besides, the US-based crypto exchange should cap expenditure to regular business conduct.
It mandates Binance.US to facilitate the expedited discovery of security and custody of the customers’ assets. The order instructed Binance employees or their agents against destroying the documents and evidence deemed relevant to the consent.
The SEC failed to specify the amount Binance is to repatriate. Nonetheless, the security watchdog’s enforcement division head Gurbir Grewal lauded the restrictions citing that Zhao and Binance have commingled customer assets as they desired. He supported the restrictions as countering the control and possible diversion of customer assets, safeguarding the investors’ assets.
A binance executive downplayed the restrictions imposed as yielding no change considering that the user funds are secured through the Binance-affiliated platforms.
The anonymous Binance official observed that the SEC’s pursuit of urgent relief was unwarranted. Nevertheless, the official expressed pleasure in the requested resolution through mutually acceptable terms.
SEC Emphasizes Safeguard of Customer Assets From Potential Commingling
SEC had on June 6 petitioned the federal court to freeze funds associated with the American subsidiary. The submission before the District of Columbia sought to safeguard the customer assets considering the entity’s lengthy period of violative conduct.
Also, the Garry Gensler-led agency emphasized that Binance disregarded the US federal laws. Instead, Binance.US engaged in evasive regulatory oversight and questionable financial transfers involving the customer’s assets.
The District of Columbia court judge Amy Jackson mandated the SEC and Binance to negotiate during the June 13 hearing. The negotiation would save the assets from the freeze sought by SEC.
While the consent order guarantees Binance.US continued operations, the crypto exchange will likely suffer a prolonged legal battle reminiscent of Ripple Labs’ tussle with the SEC.
Binance Assembles Big-Name Defense Team
Meanwhile, Binance is engaging a defense team comprising big names previously serving in the SEC enforcement division. The firm is counting on the input of Richard Grime, who previously served in the assistant director role at SEC. William McLucas is defending BAM Trading Services, who served the SEC for over eight years as the enforcement director.
Binance added George Canellos into its defense, fighting the 13 counts. The lawyer from Milbank previously worked as the co-director at SEC’s enforcement division. Also, Canellos headed the major crimes division within the Attorney’s office in New York Southern District.
Zhao’s defense is led by Douglas Yatter, who worked as a trial lawyer within the Commodity Futures Trading Commission (CFTC). Binance is counting on the input of Gibson Dunn and Latham, who constitute Binance’s defensive team in the lawsuit initiated by CFTC in March. CFTC alleges that Binance failed to register with the commodity watchdog, thus flouting the law.
The submission by SEC captures a 13-count complaint portraying that Binance blatantly violated federal securities laws. SEC accuses Binance Holdings and Zhao of leveraging the secretive links to enrich themselves with billions of dollars while compromising the security of investors’ assets.
Outlook of Possible Consequences of Binance Lawsuit
The Columbia Business School Professor anticipates that Binance’s legal fees will rise as the Department of Justice (DoJ) may file criminal charges. The blockchain-oriented Zero Knowledge Consulting partner admits that it may not take long before the DoJ replicates the move by CFTC and SEC.
The suit by SEC is rattling the digital assets industry, particularly with Binance Coin (BNB) losing 18% of its value since the agency filed the complaint to exchange at $240. It represents a 64.93% decline from the $686.31 level it realized on May 10, 2021, per CoinGecko.
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