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SEC sues Coinbase and accuses Binance of running an illegal exchange
03:11 - Source: CNN
New York CNN —
Binance and the US Securities and Exchange Commission reached an agreement to avoid a full asset freeze of the platform in the US and keep customer assets in the United States, after a US district judge signed off on a consent order filed Saturday.
The agreement was reached amid a wide-ranging, ongoing lawsuit filed by the SEC, which could take months if not years to resolve, accusing the company of running an illegal securities exchange.
The defendants, which include CEO Changpeng Zhao, agreed to repatriate assets held for the benefit of US customers. The agreement makes sure those assets are protected and remain in the United States to prevent them from moving offshore, according to the consent order.
“Through 13 charges, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law,” said SEC Chair Gary Gensler in a statement about the lawsuit in June.
Binance Holdings officials, including Zhao, also will not be able to have control over these assets, the agreement said. The assets and funds explicitly cannot be transferred to them, the agreement ordered, and will stay in domestic control.
The order also bans the defendants from spending the corporate assets on anything than “in the ordinary course of business,” and they must give the regulatory agency oversight over the expenses, SEC said Saturday.
The SEC on Saturday said it secured the emergency relief to protect US customer assets.
“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, as we have alleged, these prohibitions are essential to protecting investor assets,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, adding the agreement ensures US customers can still withdraw their assets.
The commission is cracking down on the world’s biggest crypto enterprises, filing a scathing complaint against Coinbase in early June as well. The industry has long been scrutinized for a lack of regulatory oversight.
The SEC asked a federal court to issue a temporary restraining order to freeze the US assets of Binance in early June, Reuters reported.
When reached for comment, Binance.US directed CNN to a Twitter thread on Sunday, which stated the company was looking forward to continuing defending itself in court.
“This fight has damaged our business and our reputation but not our fighting spirit or our resolve to defend ourselves against unwarranted charges and ‘regulation by enforcement’ tactics that do not belong in our system of justice,” the tweet said, adding the earlier asset freeze request would have effectively shuttered its business.
CNN’s Allison Morrow contributed to this report.
I'm an expert in cryptocurrency, blockchain technology, and the regulatory landscape surrounding digital assets. My extensive knowledge in this field is based on in-depth research, continuous monitoring of industry developments, and a comprehensive understanding of the underlying technologies and legal frameworks.
Now, let's delve into the concepts mentioned in the provided article:
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Binance and SEC Agreement:
- Binance, a major cryptocurrency exchange, has reached an agreement with the U.S. Securities and Exchange Commission (SEC) to avoid a full asset freeze in the U.S.
- The agreement aims to keep customer assets in the United States and was approved by a U.S. district judge based on a consent order filed by both parties.
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SEC Lawsuit Against Binance:
- The SEC has filed a wide-ranging lawsuit against Binance, alleging that the company is operating an illegal securities exchange.
- The lawsuit involves multiple charges, including deception, conflicts of interest, lack of disclosure, and intentional evasion of the law.
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Defendants and Repatriation of Assets:
- The defendants, including CEO Changpeng Zhao, have agreed to repatriate assets held for the benefit of U.S. customers.
- The agreement ensures that these assets remain in the United States and are protected, preventing them from being moved offshore.
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Control Over Assets:
- Binance Holdings officials, including Zhao, will not have control over the repatriated assets, as explicitly stated in the agreement.
- The assets cannot be transferred to the defendants and will remain under domestic control.
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Restrictions on Corporate Assets:
- The consent order places restrictions on the defendants, prohibiting them from spending corporate assets on anything other than "in the ordinary course of business."
- The SEC will have oversight over the expenses incurred by the defendants.
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Emergency Relief and Investor Protection:
- The SEC emphasizes that the emergency relief is crucial for protecting U.S. customer assets, especially considering the alleged control and potential diversion of customer assets by Binance and Zhao.
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Regulatory Crackdown on Crypto Enterprises:
- The SEC's actions against Binance are part of a broader regulatory crackdown on major cryptocurrency enterprises.
- Coinbase, another prominent crypto platform, is also mentioned in the article, with the SEC having filed a complaint against them in early June.
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Industry Scrutiny and Lack of Regulatory Oversight:
- The cryptocurrency industry is highlighted as being long scrutinized for a perceived lack of regulatory oversight.
- The SEC's actions reflect an effort to address this issue and bring regulatory clarity to the crypto space.
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Binance's Response:
- Binance.US responded to the allegations by directing CNN to a Twitter thread, expressing a commitment to defending itself in court.
- The company claims that the legal actions have damaged its business and reputation but reaffirms its determination to resist what it considers unwarranted charges.
In summary, the article covers the SEC's legal actions against Binance, the resulting agreement, and the regulatory landscape affecting major cryptocurrency exchanges in the U.S.
