Binance and SEC agree deal to protect Binance.US customer assets

June 19, 2023 - The Securities and Exchange Commission (SEC) has obtained emergency relief in a significant development regarding the ongoing litigation against Binance Holdings Limited, BAM Management US Holdings Inc., BAM Trading Services Inc., and Changpeng Zhao ("CZ"). The recent order issued by the United States District Court for the District of Columbia is aimed at safeguarding the interests of Binance.US crypto trading platform customers, enabling seamless asset withdrawals and ensuring asset protection within the United States throughout the SEC's pending litigation against Binance Holdings Ltd., BAM, and their founder, Zhao.

In response to the alleged co-mingling and diversion of customer assets by CZ and Binance, the SEC's Division of Enforcement emphasised the necessity of implementing essential measures to protect investor 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," stated Gurbir S. Grewal, Director of the SEC's Division of Enforcement. The SEC has avoided a full asset freeze and is ensuring that U.S. customers will have the ability to withdraw their assets while the underlying misconduct is addressed and CZ and Binance entities are investigated for the alleged securities law violations.

The order contains key provisions that fortify asset repatriation and customer protections, including:

Repatriation of Assets: All defendants are required to repatriate assets held for the benefit of BAM's U.S. customers back to the United States.

Asset Maintenance: BAM is obligated to maintain U.S. customer assets within the United States for the duration of the litigation and facilitate customer withdrawals.

Asset Transfer Prohibition: BAM is expressly prohibited from transferring assets or funds, or providing control over such assets or funds, to co-defendants Binance Holdings Limited, Changpeng Zhao, or their affiliates.

Spending Restrictions: BAM is restricted from spending assets or funds, except for ordinary course business expenses. Moreover, BAM must provide the SEC with oversight over such expenses.

Records Preservation: All defendants are prohibited from destroying records relevant to the litigation.

Sworn Accountings: All defendants are required to submit expedited sworn accountings of certain assets to the SEC.

Expedited Discovery: All defendants are compelled to submit to expedited discovery by the SEC regarding the custody and security of customer assets.

In response, Binance CEO 'CZ' posted on Twitter that Binance is pleased that the SEC agreed to avoid a full asset freeze, but sees the emergency relief as unnecessary:

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…

— CZ 🔶 Binance (@cz_binance) June 17, 2023