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(Kitco News) –
The United States Securities and Exchange Commission (SEC) and Binance.US are working toward a compromise on access and custody of the exchange’s assets after the presiding judge demanded that they find a workable solution that meets both their needs.
Lawyers for the SEC and BAM Trading, the holding company behind Binance’s U.S. operations, jointly filed a request for a consent order that would enable Binance.US to make payroll and fulfill other business needs, while the SEC would be assured that Binance global, and founder Changpeng Zhao in particular, cannot access the U.S. funds.
The two sides were forced to the negotiating table after U.S. District Judge Amy Berman Jackson ruled during a Monday court session in Washington DC that the SEC had not proven the necessity for the total freeze of the exchange’s assets.
The consent order states that “on or before the date the Court issues this Consent Order,” Binance.US will “ensure that BAM Trading and BAM Management obtain and maintain sole possession, custody, and control of all Customer Assets,” and all transfers and withdrawals will be done only through “officers and employees located in the United States, or under the control of a non-affiliated third party custodian.”
The filing also stipulates that BAM Trading and BAM Management will not provide access to these assets to “Binance, Zhao, and any individual or entity with any affiliation, agreement, or other relationship with Binance, Zhao, or any Zhao- owned or -controlled entity.”
In return for these assurances, the SEC will withdraw their request for the total freeze of Binance.US assets, enabling the exchange to continue conducting regular business operations.
“BAM Trading and BAM Management may continue to make payments for the purchase of goods and services, salaries for BAM Trading and BAM Management personnel, including preexisting benefits, professional fees, and other similar ordinary-course expenditures for the operation of their businesses,” the filing states.
The final amendments to the filing were due at 1 pm on Tuesday, so both sides are now awaiting the decision of the judge on the consent order.
On June 5, the SEC filed a 13-charge lawsuit against Binance and its founder Changpeng Zhao accusing them of operating an illegal platform in the U.S. and misusing customer funds. The following day, the United States District of Columbia court wrote that they agreed with the SEC’s request for an emergency restraining order to freeze the assets of Binance.US.
In a 42-page filing submitted on Monday, lawyers for Binance characterized the order freezing their assets as unnecessary, and accused the SEC of manufacturing an emergency.
“The SEC’s request for a temporary restraining order should be denied for several reasons, but the most important is this: there is no risk to BAM’s customer assets,” they wrote. “Indeed, there is no ‘emergency’ here at all, other than the one manufactured by the SEC for its own purposes, when the alleged securities law violations, according to the SEC, have been going on publicly and openly for years.”
The Binance.US filing also included the now-familiar claim that the SEC cannot demand that Binance’s U.S. operations register with them if they cannot provide a clear definition of which crypto assets are securities and under their jurisdiction.
“[T]he SEC has failed to show the requisite likelihood of success as to the registration claims against BHL and the control person claims against Mr. Zhao,” they wrote. “The SEC does not have authority to require registration when it has not answered the threshold question of what cryptocurrency assets, if any, constitute securities under federal securities laws. This complex question is the subject of intense debate and extensive legal proceedings across the nation. It deserves to be considered on a full record, not on a purportedly emergency basis over a matter of just a few days.”
Even if Binance were to prevail in their argument to the court, the emergency order has already had a profound and far-reaching impact on both their U.S. and global business operations.
On June 9, Binance.US said that as a result of the freeze, the exchange would no longer be able to continue processing U.S. dollar deposits and withdrawals, announcing that they would become a crypto-only exchange.
“[I]n light of the Commission’s increasingly aggressive tactics, our payment and banking partners have…
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