The US court conducted a hearing to announce its decision regarding the United States Securities and Exchange Commission’s (SEC) decision to freeze the assets of Binance US in the ongoing case. The court has advised both the parties to work on an agreement that would allow the exchange to avoid freezing all of its assets.
On June 13, the court suggested both parties negotiate the terms and come to a mutual agreement. Notably, Amy Berman Jackson, the district judge, referred the two organizations to a magistrate judge to work toward a compromise arrangement to protect customer funds without having to shut down the exchange. In the hearing, the judge said:
Shutting it down completely would create significant consequences not only for the company but for the digital asset markets in general.
Reportedly, Judge Jackson highlighted that she wouldn’t come to a final decision on the SEC’s motion for a temporary restraining order until the two parties had worked through the situation with the magistrate. Further, an update on the negotiations situation made with the magistrate has been scheduled for the end of business hours on Thursday i.e. June 15th.
Additionally, according to the judge, the SEC and Binance.US seemed “not that far apart” when it came to reaching an agreement on the matter. Interestingly, before Judge Jackson reached her decision at the hearing, John Read Stark, former SEC enforcement attorney, tweeted that there is “a lot of conflict between what each party” wanted to get out of the hearing. He added:
That does not mean the judge cannot order a compromise and find common ground.
On June 5th, the SEC filed 13 charges against Binance.US including unregistered offers and sales of the stablecoins – BNB and BUSD, its services namely the Simple Earn and BNB vault products, and its staking program. Additionally, the regulator claims in its suit that Binance failed to register its online platform as an exchange or a broker-dealer clearing agency.
It also stated that Binance’s “BAM Trading and BAM Management” defrauded equity, retail, and institutional investors about purported surveillance and controls over manipulative trading on the platform, which was in fact “virtually non-existent.” The SEC also claimed that funds from Binance and Binance.US were commingled into an account controlled by CZ-associated Merit Peak Limited.
On the day following the lawsuit, the SEC filed an emergency motion for a temporary restraining order on Binance.US. While the exchange claimed the motion was unwarranted, it announced delisting of several trading pairs from the platform which is scheduled to take place today. Additionally, the exchange also halted USD deposits and withdrawals.
Just before the scheduled hearing, in a June 12 joint memorandum submitted to the court, both Binance.US and Zhao denied the claims that funds were ever mishandled. They accused the SEC of being “unable to identify a single instance” in which Binance.US customer funds were ever misused.
The news of freezing the assets reportedly triggered panic among investors which also resulted in huge outflows from the exchange. While the regulator has been largely criticized for the lawsuit, recent incidents including the leaked chats and the DoJ’s investigation into money-laundering allegations on the exchange, put its image into question.
Besides the SEC feud, there are anticipations that Binance will very soon be hit by another notice from the DoJ regarding the money-laundering allegations. Additionally, the exchange is also dealing with the Commodity Futures Trading Commission (CFTC) which accused it of violating federal commodities laws. The lawmakers also requested some serious action to be taken against the exchange for lying to the Congress.