Binance Judge Trying To Prevent US Asset Freeze But Crypto Exchange Faces Protracted Judicial Slog; Criminal charges are possible

Binance looks likely to avoid an asset freeze that would have crippled its ability to do business in the US, but it faces a long battle with the Securities and Exchange Commission over allegations it flouted the country’s financial services regulations and is pending also risk criminal penalties if the Department of Justice (DOJ) itself files charges.

A federal judge on Tuesday urged the company and the SEC to reach a compromise that would allow Binance to continue its U.S. operations while challenging a civil lawsuit from the regulator. A status update of the negotiations is expected today.

Filings filed by both parties ahead of the hearing suggest that Binance “offered to give the SEC about 90% of what they asked for,” said James Murphy, a securities attorney based in Richmond, Virginia. “I thought it was a very generous and reasonable proposal that would accomplish a number of things. First, it should convince the SEC and the judge that US clients’ assets are not at risk because this is not an FTX scenario. And it would allow for orderly operation of Binance.US during this litigation that could be lengthy,” he added.

While Binance may be able to evade the freeze, Austin Campbell, an adjunct professor at Columbia Business School and managing partner of blockchain-focused Zero Knowledge Consulting, says, given allegations of fraud from the SEC and the Commodity Futures Trading Commission (CFTC): I would expect the DOJ to play along at some point. It’s just a question of when.”

Binance.US has tapped George Canellos of the Milbank law firm to represent it, according to a case filed Wednesday. Canellos has worked for the SEC and also for the Justice Department, according to his profile on the Milbank site.

“Binance is clearly preparing for criminal prosecution,” said John Reed Stark, former SEC chief of internet enforcement, said in a Twitter post. “Given the gravity of the fraud alleged by the CFTC and SEC (which may also be the tip of the iceberg of any criminal charges), a DOJ prosecutor would certainly seek jail time for anyone convicted or pleading guilty to Binance- related crimes.”

Last week, the SEC filed a 13-point indictment against Binance, its CEO Changpeng Zhao, and US affiliates. The costs include serving unregistered exchanges, broker-dealers and clearing houses; misrepresent trading controls and oversight on the Binance.US platform; and the unregistered offering and selling of securities. The agency also attempted to freeze the company’s US assets, a move Binance claimed would effectively end its operations in the country.

After the SEC filed charges, Binance.US said it would stop offering US dollar trading after its banking partners signaled an intent to interrupt conventional currency services. Binance.US oversees $2.2 billion in crypto holdings, the agency said.

According to data platform DefiLlama, crypto traders have withdrawn approximately $1.41 billion from Binance’s global exchange in the past seven days. Binance’s BNB
BNB
token lost 22.4% since SEC lawsuit was announced, according to CoinGecko from $233.67 from $301.

The SEC lawsuit follows a complaint from the CFTC in March against Binance, Zhao and the company’s former chief compliance officer, Samuel Lim, alleging that the company put profit before compliance and “many violations of the Commodity Exchange Act ( CEA) and CFTC regulations began. ”

“There are a handful of different issues that Binance will have to defend against in this case. They can be broadly grouped into securities related issues around the offering and selling of unregistered securities, the requirement to register as an intermediary with the SEC and all these fraud issues which will really depend a lot on what the SEC can do. evidence based on the Binance investigation,” said Mike Selig, counsel at New York-based law firm Willkie Farr & Gallagher. “This may take longer to resolve the Ripple case, which took a long time to begin with.”

The SEC lawsuit against Ripple is in its third year, although a resolution to that case involving a single cryptocurrency is expected soon.