Court wants Binance.US, SEC to avoid full asset freeze
A federal judge set a Jun. 15 deadline for the SEC and Binance.US to resolve the matter, a bid to avoid damaging crypto markets
Binance CEO Changpeng Zhao | Web Summit/"Changpeng Zhao" (CC license)
Binance.US and the Securities & Exchange Commission (SEC) are racing against a deadline to strike a deal that could prevent a full asset freeze for the exchange.
The commission initiated legal action against Binance and affiliated entities on earlier this month. Following that, the SEC requested a temporary restraining order and asset freeze.
US District Judge Amy German Jackson on Tuesday encouraged the SEC to find middle ground with Binance.US. Doing so could pave the way for Binance to maintain its operations within the US.
Jackson gave the parties until Jun. 15, 5pm ET to figure things out and chose a magistrate judge Zia Faruqui to help negotiations, according to an order filed Tuesday.
Binance.US also needs to submit a list of regular expenses by June 14 at 9am ET. Binance.US suspended US dollar deposits last week and warned users that withdrawals could be suspended as early as Tuesday, in preparation for the court session.
The SEC also suggested a new deal on Tuesday that would relax certain limitations which previously demanded a total freeze of assets.
The proposed agreement provides some guarantees to Binance affiliate BAM Trading (which runs Binance US), allowing the firm to maintain control over its US assets for paying salaries and fulfilling other financial obligations.
BAM Trading would also be able to assist customers in redeeming their crypto assets without any restrictions.
“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 order states.
SEC demands user crypto be sent back to Binance.US
The proposed order stipulates that Binance CEO Changpeng Zhao would have no access to the US exchange’s assets or wallets.
The SEC further requested that Binance bring back customer assets to the US, where entities independent of Zhao would have control and could handle customer redemptions.
In its lawsuit, which cites 13 separate counts, the SEC claimed that Sigma Chain and Merit Peak, two foreign entities controlled by Zhao, were used as a means to commingle billions in customer funds with Binance’s own.
These companies are believed to have operated as Binance market makers or intermediaries meant to provide liquidity for the exchange.
Blockworks has reached out to Binance for comment. Binance earlier stated that freezing its assets would essentially stop its business in the US and prevent any transfer of funds, including redemptions.
And the judge reportedly agreed, saying during the hearing that completely shutting it down would have significant consequences not just for the company, but for the wider crypto market too.
The SEC’s proposal is still awaiting approval, and more updates are anticipated on Thursday.
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