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Binance hearing: Judge denies asset freeze, will engage in discussions with SEC regarding securities definition.

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Judge denies asset freeze for BinanceUS, both parties to continue negotiations.

Source: CoinDesk, Bloomberg, TheBlock, etc.

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Original editor: Wu on blockchain

On the morning of June 14th Beijing time, the federal judge responsible for overseeing the Binance and BinanceUS cases regarding the supervision of the US Securities and Exchange Commission refused to issue a temporary restraining order to freeze the assets of the US trading platform. Judge Amy Berman Jackson of the District of Columbia Court stated that "there is absolutely no need" for a restraining order. At the same time, the judge ordered BinanceUS to provide a list of its business expenses to the court and ordered both parties to continue negotiations.

Earlier in the day, the judge hinted that she may be inclined to impose some form of restriction on Binance's access to BinanceUS assets, but not a comprehensive injunction, ordering the company to coordinate the proposed restrictions and ordering the SEC to use what the company proposed instead of the injunction itself. SEC lawyer Jennifer Fowler told the judge on Tuesday that "we are open to continuing to operate the business." A representative of BinanceUS said they mainly wanted to get normal operating expenses and they "did not want to accept the death penalty represented by asset freezes." The SEC lawyer said that BinanceUS also told the US Securities and Exchange Commission that it may stop doing business in the United States, prompting the need for an emergency freeze order. BinanceUS lawyers said the exchange needed to be able to pay normal business expenses, such as rent, wages, suppliers, and software licenses. "The area that surprises us is asset freezes, which will be misunderstood by banks," the judge agreed. "Completely shutting it down would not only have a significant impact on the company, but also on the entire digital asset market," she said at the hearing.

Judge Jackson said that ultimately the differences between the two sides are not significant. If they can reach an agreement, it will give all parties time to properly organize the details of the case. She referred them to a local judge to reach a settlement agreement. The judge stated that if an agreement is reached, she will no longer need to make a ruling on the SEC's temporary restraining order request.

Binance has proposed a compromise solution in response to the asset freeze request from the SEC, which includes transferring the cryptocurrency assets of US customers to a new wallet with new private keys that will be controlled separately by BinanceUS's US staff. The US Securities and Exchange Commission has requested in a compromise proposal submitted to the court that Binance repatriate customer assets to the US, where these assets will be controlled by entities beyond the control of CZ and can be used to process redemptions for customers.

Last week, the SEC sued Binance, BinanceUS, and Binance founder Zhao Changpeng "CZ", accusing them of operating as unregistered securities exchanges, brokers, and clearing agencies. The regulatory agency also accused them of commingling a significant amount of funds, allowing CZ to obtain BinanceUS customer assets. The US Securities and Exchange Commission filed a motion for a temporary restraining order after the lawsuit.

Judge Jackson also delved into the fundamental question at the heart of the lawsuit: what makes a cryptocurrency a security, and if it's not a security, is it still a commodity? While the judge posed some basic questions on this issue, she was not satisfied with the answers. As the hearing was about to begin, the judge asked SEC lawyer Matthew Scarlato to differentiate between "cryptocurrencies" and "cryptocurrency securities." Scarlato told the judge that the regulatory agency had provided several examples of cryptocurrencies it believed were securities in broader complaints, but also reserved the right to evaluate the remaining tokens on exchanges at a later time.

The judge later asked Matthew Martens, the representative lawyer of Binance.US, whether BNB is a commodity, as the company argued that it is a security. Martens responded, "This is a type of cryptocurrency."

BinanceUS has hired four lawyers from Milbank LLP, including former Co-Director of the Division of Enforcement at the U.S. Securities and Exchange Commission, George Canellos, to prepare for illegal securities trading charges. George Canellos is the global head of litigation and arbitration at Milbank, and previously supervised around 1,300 lawyers at the SEC. The other three lawyers also have experience in handling criminal cases and bankruptcies.

In addition, former director of the SEC Internet Enforcement Office, John Reed Stark, believes that the US Department of Justice will submit or has already submitted a criminal indictment related to Binance. He believes that the complaints from the CFTC and SEC read more like criminal indictments, filled with charges of fraud, deception, obstruction of justice, and money laundering. He believes that neither the CFTC nor the SEC cases have focused on money laundering, which may be a space reserved for the US Department of Justice's criminal lawsuit against Binance. It should be noted that this is Stark's personal speculation, and he has always held an extreme hostile attitude towards cryptocurrency companies and the industry, including accusing Tether of being a domino that is about to fall.

Reference information:

1. https://www.coindesk.com/policy/2023/06/13/us-judge-rebuffs-sec-request-for-binanceus-asset-freeze-for-now/

2. https://www.theblock.co/post/234511/binance-us-sec-agree-to-work-out-deal-to-avoid-full-asset-freeze-bloomberg?utm_source=twitter&utm_medium=social

3. https://www.bloomberg.com/news/articles/2023-06-13/binance-us-sec-not-far-apart-on-deal-avoiding-full-asset-freeze?leadSource=uverify%20wall#xj4y7vzkg