In a critical development on Friday, June 16, Binance, its American subsidiary Binance.US, and the U.S. Securities and Exchange Commission (SEC) have come to a temporary understanding concerning control over customer assets. Under the agreement, only Binance.US personnel will have access to such assets.
The drafted agreement, awaiting the green light from the supervising federal judge, details specific steps to be taken by Binance.US. These include restricting Binance officials from accessing customers’ private keys, hardware wallets, and root access to Binance.US’s Amazon Web Services. It is also stated that Binance.US will provide detailed information regarding business expenses, inclusive of projected costs, in the forthcoming weeks.
Comprehensive Risk Management
This arrangement has been made in direct response to an application from the SEC, which aimed to freeze Binance.US’s total assets amid ongoing litigation. The regulatory body raised concerns that without a temporary restraining order, there may be a potential threat of funds being moved offshore or critical records being intentionally destroyed.
However, the legal team of Binance.US vigorously disagreed with this approach, arguing that imposing a total freeze on all assets would virtually be akin to implementing an overly harsh “death penalty” on the enterprise.
In an initial hearing, U.S. district court judge Amy Berman Jackson suggested that a stipulation agreement between the parties would be more beneficial than the court issuing a restraining order. She pointed out that such an order would only last two weeks, a short period considering the sheer volume of submitted exhibits—over 4,000 pages.
Moving Towards a Compromise
The agreement includes additional provisions, such as establishing new cryptocurrency wallets by Binance.US, which will be out of reach for employees of other Binance divisions. Moreover, Binance.US pledges to supply the SEC with more information and has agreed to a fast-tracked discovery process. Crucially, U.S.-based clients will retain their ability to withdraw funds throughout this period.
Should the agreement be ratified, it will alleviate some of the SEC’s worries as the more significant lawsuit progresses. The SEC has recently filed a lawsuit against Binance and Binance.US on charges of trading unregistered securities, alleging poor practices and intermingling of funds. However, this temporary agreement does not address the broader lawsuit.
