Binance, SEC Agree to Keep US Customers' Assets in Country Until Resolution of Lawsuit

The SEC on June 5 sued Binance, its CEO and founder Changpeng Zhao and Binance.US's operator.

By Reuters | Updated: 20 June 2023 15:49 IST

Binance, SEC Agree to Keep US Customers' Assets in Country Until Resolution of Lawsuit

Photo Credit: Reuters

Binance.US will create new crypto wallets that global exchange's employees have no access

Highlights

The agreement still requires the approval of the federal judge
The agreement allows only Binance.US employees access to these assets
US SEC has also filed a suit against Coinbase

Binance, the world's biggest cryptocurrency exchange, and Binance.US have entered into an agreement with the U.S. Securities and Exchange Commission to ensure that U.S. customer assets remain in the United States until a sweeping lawsuit filed this month by the regulatory agency is resolved.

The agreement, disclosed in court papers filed late on Friday, still requires the approval of the federal judge overseeing the litigation. To make certain that U.S. customer assets do not go offshore, the agreement allows only Binance.US employees access to these assets.

The SEC on June 5 sued Binance, its CEO and founder Changpeng Zhao and Binance.US's operator, alleging that Binance artificially inflated its trading volumes, diverted customer funds, failed to restrict U.S. customers from its platform and misled investors about its market surveillance controls.

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The suit and one filed by the SEC the following day against major U.S. exchange Coinbase represented a dramatic escalation of a crackdown on the industry by U.S. regulators.

Under the agreement, which does not resolve the SEC lawsuit, Binance.US will take steps to make sure that no Binance Holdings officials have access to private keys for its various wallets, hardware wallets or root access to Binance.US's Amazon Web Services tools, the court filings showed.

The SEC said in a statement released on Saturday that the emergency relief order secured for Binance.US customers will protect their assets and ensure that they can continue to withdraw those assets.

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"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," Gurbir Grewal, director of the SEC's enforcement division, said in the statement.

A Binance spokesperson said in a statement on Saturday: "Although we maintain that the SEC's request for emergency relief was entirely unwarranted, we are pleased that the disagreement over this request was resolved on mutually acceptable terms. User funds have been and always will be safe and secure on all Binance-affiliated platforms."

Under other provisions in the proposed agreement, Binance.US will create new crypto wallets to which the global exchange's employees have no access, provide additional information to the SEC and agreed to an expedited discovery schedule, the filings said.

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The U.S. affiliate of Binance halted dollar deposits last week and gave customers a deadline of June 13 to withdraw their dollar funds, after SEC asked a court to freeze its assets.

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