Recently, a federal judge in Washington DC, overseeing the US Securities and Exchange Commission’s (SEC) case against Binance and Binance.US. It has decided against issuing a temporary restraining order to freeze the assets of the US trading platform. This decision allows Binance.US to continue its operations while engaging in negotiations with the regulator to establish limitations on the company.
Judge Amy Berman Jackson of the DC, Distinct Court emphasized that if both parties can reach a consensus on restrictions, a restraining order would be unnecessary. The judge instructed Binance.US to submit a list of its business expenses to the court. She also directed the involved parties to continue their negotiations. A progress update is expected by the end of Thursday.
During the court proceedings, Judge Jackson scrutinized the SEC attorneys regarding their motion to freeze Binance’s assets. The motion required Binance to demonstrate that no individuals, including CZ Zhao, had access to its funds. The judge sought a clear answer on whether any customer funds had moved from Binance.US to the global platform.
Earlier in the day, Judge Jackson had hinted at the possibility of imposing certain restrictions on Binance’s access to Binance.US assets but refrained from issuing a full restraining order. Rather than making a distinction, the judge encouraged the companies to reconcile their proposed restrictions. She also asked the SEC to outline its desired limitations compared to the alternative suggested by the companies.
Jennifer Farer, an SEC lawyer, assured the judge that the SEC was open to allowing Binance.US to continue its operations. Binance.US representatives stressed their need for normal operating expenses. They expressed unwillingness to accept a complete asset freeze, likening it to a “death penalty.”
The SEC had filed a lawsuit against Binance, Binance.US, and CZ Zhao, alleging that they were functioning as an unregistered securities exchange, brokerage, and clearing agency. Furthermore, the SEC accused Binance of commingling funds, enabling CZ Zhao, who resides in the UAE as a Canadian national, to access Binance.US customer assets. The regulator followed up the lawsuit with a motion for a temporary restraining order.
Both Binance and Binance.US contested the SEC’s claims in their response to the motion, asserting that the SEC had not conclusively proven the listing of any securities and had not presented sufficient evidence to support an emergency motion.
During the proceedings, Judge Jackson delved into the fundamental question at the core of the lawsuit: the classification of crypto assets as securities or commodities. While she posed some basic questions on the matter, she expressed dissatisfaction with the answers provided. The judge asked about the difference between a “crypto asset” and a “crypto asset security.” Later, she inquired if cryptocurrencies not classified as securities were considered commodities.
The federal judge’s ruling not to impose a temporary restraining order allows Binance.US to continue operations. They can now engage in negotiations with the SEC for agreed-upon limitations. The outcome of the negotiations will determine the next steps in the case. It will allow all parties to examine the details and implications of the lawsuit.