Judge Signs Off on Binance, SEC Deal to Move All U.S. Customer Funds, Wallet Keys Back Onshore in Lieu of Restraining Order
This proposed agreement addresses the Securities and Exchange Commission (SEC) motion for a temporary restraining order.
Updated Jun 17, 2023 at 9:09 p.m.
Binance Trade Show Logo by Danny Nelson/CoinDesk
(Danny Nelson/CoinDesk) A federal judge approved of a temporary agreement among the U.S. Securities and Exchange Commission (SEC), global crypto exchange Binance, and its U.S. affiliate that will see Binance.US take steps to ensure only local employees can access customer funds while regulators and companies address a lawsuit from SEC.
On Friday evening, both parties reached an agreement that will only permit Binance.US employees access to customer funds in the short-term. Judge Amy Berman Jackson of District Court for the District of Columbia signed off early Saturday on this agreement as well as ordering all parties involved to begin proposing timelines for any potential larger lawsuits that may follow.
Under the proposed agreement, Binance.US will take steps to ensure no officials from Binance Holdings, the global exchange, have access to private keys for wallets or hardware wallets or root access for Amazon Web Services tools belonging to Binance.US. In the coming weeks, this U.S.-based crypto trading platform will share more detailed information regarding its business expenses including estimated costs.
This proposed deal came about following an SEC motion to seize all of Binance.US’s assets as part of their criminal prosecution of securities-related charges. The regulator expressed concern that funds or records could be moved offshore if no TRO was granted, while Binance.US attorneys opposed such action as they claimed such action would amount to “death penalty”.
Judge Jackson advised both parties it would be in their best interests to reach an agreement on a proposed stipulation rather than have her create a temporary restraining order with only two weeks for its implementation. She noted during an earlier hearing this week that this time limit is insufficient given all the documents filed so far by each side – there have already been over 4,000 pages filed by them!
Read more: U.S. Court Rejects SEC Request to Freeze Binance.US Assets Now
Other provisions in the proposed agreement would require Binance.US to establish new crypto wallets without access for global employees, provide additional information to the SEC, and agree upon an expedited discovery schedule.
U.S. customers will still be permitted to withdraw funds during this time.
The proposed agreement will address some of the SEC’s stated concerns while its lawsuit progresses through the legal system. Last week, it filed suit against Binance and Binance.US for offering and trading unregistered securities as well as massive commingling of funds among other alleged poor practices; this proposed agreement does not deal with these aspects directly.
“Gurbir Grewal, SEC Director of Enforcement stated in a press release: ‘Considering Changpeng Zhao and Binance have control of customer assets on their platforms and have the ability to commingle or divert them at will as we allege, these prohibitions are essential for protecting investor assets.” U.S. customers will still be able to withdraw assets while we work towards resolving alleged misconduct on these platforms and holding Zhao/Binance entities accountable for possible securities law violations.”
Binance.US issued a Tweet Saturday afternoon saying the battle had compromised both their business and reputation but not their determination to defend against unwarranted charges.
Binance issued a statement Saturday saying they maintained the SEC’s request for emergency relief was entirely unnecessary and are pleased that our disagreement over it has been settled mutually in an acceptable fashion. User funds remain safe and secure on all Binance platforms.”
UPDATE (June 17 2023, 5:50 UTC): Provides additional detail regarding the temporary agreement’s role in the larger SEC suit.
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Update (June 17, 17:00 UTC): Includes court approval of Binance’s claims as well as statements from Binance and Binance.US.
UPDATE (June 17 18:10 UTC): Adds SEC Statement.
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