The Securities and Exchange Commission reached a deal with Binance late Friday that would allow the world’s largest cryptocurrency exchange to keep operating in the United States and safeguard customer assets as the company battles a government lawsuit.
After filing fraud charges against Binance on June 5, the S.E.C. moved to freeze the firm’s U.S. assets in a move that the exchange’s lawyers said would put it out of business in the United States.
But in a court filing on Friday, the S.E.C. said that the two sides had reached a compromise after several days of court-ordered mediation. On Saturday morning, Judge Amy Berman Jackson, who is overseeing the case in federal court in Washington, signed off on the deal.
Under the agreement, funds belonging to customers of Binance.US, an affiliate of the company’s larger offshore exchange, would go into special digital repositories accessible only to the U.S. exchange — and not to Binance’s international operation, or its founder, Changpeng Zhao. The deal stipulates that Binance.US can transfer company assets “solely to make payments for expenses or to satisfy obligations incurred in the ordinary course of business.”
Binance said on Saturday, “Although we maintain that the S.E.C.’s request for emergency relief was entirely unwarranted, we are pleased that the disagreement over this request was resolved on mutually acceptable terms.”
The S.E.C.’s director of enforcement, Gurbir Grewal, said in a statement on Saturday, “We ensured that U.S. customers will be able to withdraw their assets from the platform while we work to resolve the alleged underlying misconduct.”
The dispute over Binance’s assets was part of a high-stakes legal battle that could determine the future of the crypto industry in the United States.
In recent months, the S.E.C. has embarked on an aggressive industry crackdown, suing Binance as well as its largest U.S. rival, the crypto exchange Coinbase. With the regulatory pressure intensifying, some crypto companies have vowed to fight in court, while others are exploring options outside the United States, decamping to countries with more lenient regulations.
The agreement to safeguard customer assets in the United States would resolve the first of what could be many legal skirmishes to come. The S.E.C., in a sweeping civil fraud lawsuit, charged Binance and Mr. Zhao with mishandling customers’ deposits, lying to regulators and allowing market manipulation to proliferate on the exchange.
In court filings, the S.E.C. said an asset freeze was necessary to ensure that Binance did not endanger user funds or seek to move money abroad. But the company said the S.E.C.’s proposal was overly punitive and would prevent the firm from paying employees and vendors, causing its operations to “quickly grind to a halt.”
Binance was also sued earlier this year by the Commodity Futures Trading Commission, and Mr. Zhao is under investigation by federal prosecutors. The company has argued that the S.E.C. is being unreasonable in going after the business and its founder. Four major law firms are representing Binance and Mr. Zhao, better known as C.Z., in the litigation in Washington.
At a court hearing in Washington on Tuesday, Judge Jackson expressed some skepticism over the S.E.C.’s strategy of using enforcement actions to impose regulatory oversight on the crypto world. She called the approach “inefficient and cumbersome” and it is one reason she urged the parties to negotiate a deal on safeguarding customer assets in the United States.
But Judge Jackson also gave short shrift to Binance’s argument that it was surprised by the aggressiveness of the S.E.C.
According to court filings, the S.E.C. has been investigating Binance since 2020. “Some of the surprise expressed in the pleadings rang a little hollow,” she told Binance’s lawyers on Tuesday.