Binance, the largest cryptocurrency exchange globally, and its US-based counterpart, Binance.US, have reached an agreement with the U.S. Securities and Exchange Commission (SEC) to safeguard U.S. customer assets within the country until the resolution of an ongoing lawsuit filed by the regulatory agency.
The details of the agreement were disclosed in court documents filed on Friday, pending approval from the overseeing federal judge. The primary objective of the agreement is to prevent U.S. customer assets from being moved offshore, with exclusive access granted solely to Binance.US employees.
In the lawsuit filed on June 5, the SEC accused Binance, its CEO Changpeng Zhao, and the operator of Binance.US of several misconducts, including artificially inflating trading volumes, misappropriating customer funds, failing to enforce restrictions on U.S. customers, and providing misleading information about its market surveillance mechanisms.
The lawsuits filed by the U.S. Securities and Exchange Commission (SEC) against both Binance and Coinbase on consecutive days marked a significant escalation in the regulatory crackdown on the cryptocurrency industry in the United States. The actions against these prominent exchanges indicate a more stringent approach by U.S. regulators toward ensuring compliance within the cryptocurrency space.
The SEC’s legal actions reflect their intensified efforts to address potential misconduct and enforce regulatory standards within the industry. As per the agreement, which does not serve as a resolution to the SEC lawsuit, Binance.US will implement measures to ensure that no Binance Holdings officials have access to private keys for its wallets, hardware wallets, or root access to Binance.US’s Amazon Web Services tools.
The court documents indicate that these steps are being taken to safeguard the assets of Binance.US customers. The SEC has released a statement emphasizing that the emergency relief order obtained will protect the assets of Binance.US customers, enabling them to continue withdrawing their funds without any disruption.
Gurbir Grewal, the director of the SEC’s enforcement division, emphasized the importance of the prohibitions outlined in the agreement, stating, “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 … these prohibitions are essential to protecting investor assets.”
In response, a Binance spokesperson released a statement on Saturday expressing their satisfaction with the resolution, despite considering the SEC’s request for emergency relief unnecessary. They reassured users that their funds are and will continue to be secure on all platforms associated with Binance.
According to the proposed agreement, Binance.US will establish new crypto wallets that are inaccessible to employees of the global exchange. Additionally, Binance.US has agreed to provide the SEC with further information and has accepted an expedited discovery schedule, as indicated in the court filings.
Last week, the U.S. affiliate of Binance, Binance.US, suspended dollar deposits and set a deadline of June 13 for customers to withdraw their dollar funds. This action was taken in response to the SEC’s request to freeze the assets of Binance.US. The suspension of dollar deposits and the withdrawal deadline were implemented as part of the measures taken by Binance.US in light of the regulatory actions initiated by the SEC.
