A federal judge on Tuesday urged the Securities and Exchange Commission to reach a settlement with Binance that would allow the global cryptocurrency exchange to continue operating in the United States as it battles a civil fraud lawsuit filed by the regulator.
Last week, the SEC accused Binance and its US affiliate of mismanaging customer deposits and lying to regulators. It also sought to freeze the company’s US assets, a move which Binance claimed would force it to shut down in the United States.
At a hearing in Washington on Tuesday, Judge Amy Berman Jackson of the US District Court for the District of Columbia asked both sides to consider a possible settlement on the assets freeze, telling them she was more likely to seek a deal than rhetoric. were close. His court filings suggested. Judge Jackson ordered them to continue negotiating and to submit a status update by Thursday.
She also expressed skepticism about the SEC’s use of its enforcement powers to regulate the crypto world, calling it “inefficient and cumbersome”.
The moves against Binance are part of an increasingly aggressive regulatory crackdown on the crypto industry. A day after Binance filed the lawsuit, the SEC sued Coinbase, the largest US exchange, for trading in unlicensed securities.
That one-two punch rattled the industry, raising the specter of a years-long legal battle over the future of crypto in the United States. Scrutiny has increased since November, when the FTX exchange collapsed overnight, leading to criminal charges against its founder, Sam Bankman-Fried.
The attempt to freeze Binance’s US assets turns out to be one of the SEC’s most aggressive moves against crypto companies yet. While previous actions have forced smaller crypto firms to pay fines or discontinue some products, a victory over Binance could force the world’s largest exchange out of the country entirely, hastening a growing exodus of companies Is.
In court filings on Monday, lawyers for Binance.US, the US arm of Binance, argued that the SEC’s proposed asset freeze would mean the company could not pay vendors, employees and suppliers, bringing its operations to a “quick halt”. Will go.”
“We are not prepared to accept the death penalty in this case after eight days,” a lawyer for Binance.US said during the hearing.
Carl Tobias, a professor at the University of Richmond School of Law, said the asset freeze request may be intended to send a message to the wider crypto industry. “This is part of reestablishing the SEC’s authority to regulate in this area,” he said.
Binance.US oversees $2.2 billion in cryptocurrency holdings, with the SEC saying the freeze will have no impact on the company’s large global exchange, which is already banned from operating in the United States.
Last week, the SEC revealed that it has been investigating Binance since the summer of 2020. A few months ago, the regulator notified Binance that it was considering enforcement action against the company.
After the SEC sued Binance last week, Binance.US said its banking partner would no longer provide critical payment channels, forcing the exchange to stop offering trading in US dollars.
The SEC said in court papers that none of its moves should have surprised Binance and its chief executive Changpeng Zhao, who is also a target of the lawsuit.
“Defendants knew that their conduct with respect to US investors was illegal and put the enforcement actions of the US government at risk,” the SEC said in a filing. “Instead of stopping this type of illegal activity, Zhao and Binance doubled down.”