US Judge Denies SEC Request For Binance.US Asset Freeze For Now
WASHINGTON, DC – The federal judge overseeing the US Securities and Exchange Commission’s case against Binance and Binance.US declined to order a temporary restraining order freezing the US trading platform’s assets.
It will allow the US arm of the company to continue doing business while clearing restrictions with the regulator.
If the two sides can agree on boundaries, D.C. District Court Judge Amy Berman Jackson said, “there’s absolutely no need” for a restraining order. Meanwhile, the judge ordered Binance.US to provide a list of its business expenses to the court and ordered the parties to continue negotiating. A status update must take place before closing time on Thursday.
In a packed Washington courtroom, the judge hammered SEC lawyers on their proposal to freeze all of the company̵[ads1]7;s assets until it could prove that no one from Binance’s global platform, including Changpeng “CZ” Zhao, had access to the private keys.
At times, the judge seemed frustrated by the responses she heard when she asked whether any Binance.US client funds had actually left the United States, after several SEC lawyers said they were mainly concerned with the fact that Binance’s global platform controlled enough private key shards to move funds.
“I want to know if it’s happening or not,” she said. “It is wonderful that I have asked each of you this.”
Earlier in the day, the judge hinted that she may have been inclined to impose some sort of restriction on Binance’s access to Binance.US assets, but not a complete ban, ordering the companies to reconcile their proposed restrictions and ordering the SEC to contrast that desired with what the companies proposed instead of the visiting ban itself.
Jennifer Farer, an SEC attorney, told the judge Tuesday: “We are open to the business continuing to operate.”
And representatives of Binance.US said that they mainly wanted to get normal operating expenses and that they were “not willing to accept the death penalty” represented by a total freeze of assets.
Farer said Binance.US had constantly changed its story about how crypto assets and funds were held, from Binance.US telling the SEC it had an agreement with Binance to saying the agreement was not operational to saying the non-operational agreement was suspended.
Binance.US also told the SEC that it may cease doing business in the United States, prompting the need for an emergency order, the lawyer said.
“It’s a back and forth whether they shut down or not,” Farber said.
Still, at the end of the day, the parties were not that far apart, Judge Jackson said. If they could reach an agreement, it would give all parties time to sort through the details of the case.
The SEC sued Binance and Binance.US, along with Binance founder Changpeng “CZ” Zhao, last week, alleging that they operated as an unregistered securities exchange, broker and clearing agency.
The regulator also alleged massive commingling of funds giving Zhao, a Canadian citizen living in the UAE, access to Binance.US client assets.
The SEC followed up the lawsuit with a motion for the temporary restraining order.
The crypto exchanges pushed back against the allegations in their response to the motion, arguing that the SEC had not conclusively proven that they listed any securities and saying the regulator had not shown any evidence supporting an emergency.
Securities vs. raw materials
Judge Jackson also delved into the fundamental question at the heart of the case: What makes a crypto asset a security, and is it a commodity if it is not a security?
Although the judge asked some basic questions about the issue, she was not satisfied with the answers.
Near the opening of the hearing, the judge asked SEC lawyers to distinguish between a “crypto-asset” and a “crypto-asset security.”
SEC attorney Matthew Scarlato told the judge that the regulator had provided several examples of cryptos it believed were securities in the broader complaint, but also reserved the right to consider the rest of the tokens on the exchanges later.
The judge asked the SEC (and later Binance) whether the other cryptocurrencies were commodities.
“The ones you don’t call securities, what are they?” she asked, plunging into the heart of an issue that has plagued the crypto industry for years.
She later asked Matthew Martens, a lawyer representing Binance.US, whether BNB is a commodity since the company had claimed it was a security.
“It’s a crypto asset,” Martens said.
“What is it? Nobody will tell me,” remarked the judge.
