Binance and SEC agreement to relocate all US customer funds and wallet keys onshore.
Binance, Binance.US, and the Securities and Exchange Commission (SEC) announced a deal on Friday night that will ensure that only Binance.US employees can access customer funds in the short term.
The proposed agreement, which still needs approval from the federal judge overseeing the case, will require Binance.US to take measures to ensure that officials from Binance Holdings, the global exchange, cannot access private keys for wallets or hardware wallets, or root access to Binance.US’s Amazon Web Services tools. The U.S.-based crypto trading platform will share detailed information about its business expenses, including estimated costs, in the coming weeks.
The proposed deal is in response to an SEC motion to freeze all of Binance.US’s assets while the regulator pursues the exchange on securities-related charges. The SEC was concerned that funds could be moved offshore or records destroyed if it was not granted a temporary restraining order (TRO). Binance.US’s attorneys argued that freezing all assets would amount to the “death penalty.”
Judge Amy Berman Jackson of the District Court for the District of Columbia suggested that the parties come to an agreement on a proposed stipulation rather than have her craft a restraining order, which would come with a two-week time limit. Two weeks would be insufficient time to prepare, given the more than 4,000 pages of exhibits the parties have already filed, she said during a hearing earlier this week.
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Other provisions in the proposed agreement will require Binance.US to create new crypto wallets that global employees have no access to, provide additional information to the SEC, and agree to an expedited discovery schedule.
U.S.-based customers will still be allowed to withdraw funds during this time.
If accepted, the proposed agreement will address some of the SEC’s concerns as the broader lawsuit it filed works its way through the judicial system. The SEC sued Binance and Binance.US last week on charges of offering and trading unregistered securities, but also alleged massive commingling of funds and other poor practices. The proposed agreement does not delve into the broader suit.
UPDATE (June 17, 2023, 05:50 UTC): Adds further context on the temporary agreement’s role in the broader SEC suit.