Binance Pressures SEC for Misleading Claims

Tension arises as the SEC makes misleading claims about the consent order agreement.

Binance Pressures SEC for Misleading Claims

Earlier this month, Binance, the largest crypto exchange, became a target of the United States Securities and Exchange Commission, which shocked the crypto industry.

Initially, the main concern in the case was about the safety of deposits on Binance U.S., the exchange's U.S. partner. The Securities and Exchange Commission (SEC) first took action to freeze the company's assets.

Over the weekend, both parties reached an agreement to secure these assets and prevent a complete freeze. However, Binance has accused the SEC of making misleading claims about the consent order agreement in a recent court filing.

Right after the court granted approval for the consent order on June 17, the SEC released a statement declaring that it had obtained "emergency relief" to protect the assets of Binance U.S. customers. In the press release, Gubir S. Grewal, the Director of the SEC Division of Enforcement, alleged that Binance and its CEO, Changpeng "CZ" Zhao “have control of the platforms’ customers’ assets and have been able to commingle customer assets or divert customer assets as they please.”

In a court filing on Wednesday, June 21, Binance's lawyers criticized the market regulator for making disappointing and misleading statements. The attorneys argued that the SEC's comments in the press release were unfounded, as the regulators had admitted in court that there was no evidence of Binance mishandling customer deposits.

Binance urged the court to oblige SEC attorneys to stop making and spreading misinformation outside of the court, in accordance with the rules of professional conduct.

"The SEC's press release creates a risk of material prejudice to this proceeding," they argued, adding that it "served only to reinforce confusion and uncertainty among BAM's customers and banking partners."

SEC alleges that over 12 billion USD of customer deposits in Binance and Binance U.S. were transferred to a Zhao-controlled entity through 2019-2021.

However, based on the transcript of the 13th June hearing regarding the SEC's request to freeze assets, the regulatory authority did not provide evidence to support the alleged movement of customer funds.

At the hearing, an SEC lawyer conceded:

"So, currently, the assets are not going offshore...[W]e're not seeing any money flows outside of the United States."

Under the consent order agreement, Binance.US must be in full control of customer deposits from the United States. Additionally, regulators will oversee the expenses of the crypto exchange.

Binance U.S. businesses were significantly impacted by the SEC’s claims in the lawsuit. Lawyers of Binance argue that the press release statements have the risk of significantly damaging the case and tarnishing the case.

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