What's Up with the SEC vs Binance and Coinbase Lawsuits

Brief Background

SEC vs Binance

Earlier this month (5th June), the Securities and Exchange Commission (SEC) filed a civil case in the U.S. District Court for the District of Columbia against Binance Holdings Limited (“Binance”), BAM Trading Services Inc, BAM Management US Holdings Inc, and Binance's CEO Changpeng Zhao with 13 allegations like offering unregistered securities to the general public in the form of BNB token and BUSD stablecoin, failure to register as a broker, clearing agency and as an exchange, commingling of customer funds among other charges. More details of the charges are found on this 136-page complaint document or on this press release on the SEC website.

SEC vs Coinbase

On the 6th of June, SEC also filed a lawsuit against Coinbase with allegations of failing to register as an exchange, broker-dealer and clearing agency and the unregistered offer and sale of securities related to its staking program. It mentioned that Coinbase traded at least 13 cryptocurrencies that are securities.

Responses by Binance and Coinbase

💥The charges were denied by Binance on a blog post dated 6th of June. Here's a script:

And, to be clear: any allegations that user assets on the Binance.US platform have ever been at risk are simply wrong, and there is zero justification for the Staff’s action in light of the ample time the Staff has had to conduct their investigation. All user assets on Binance and Binance affiliate platforms, including Binance.US, are safe and secure, and we will vigorously defend against any allegations to the contrary. Rather, the SEC’s actions here appear to be in service of an effort to rush to claim jurisdictional ground from other regulators – and investors do not appear to be the SEC’s priority. Because of our size and global name recognition, Binance is an easy target now caught in the middle of a U.S. regulatory tug-of-war.

They also put out their sentiment through a tweet on the 6th of June calling out Congress to come up with a bipartisan legislation that creates workable a regulatory regime for digital assets.

💥Coinbase on the other hand criticized the approach of SEC:

The SEC’s reliance on an enforcement-only approach in the absence of clear rules for the digital asset industry is hurting America’s economic competitiveness and companies like Coinbase that have a demonstrated commitment to compliance. The solution is legislation that allows fair rules for the road to be developed transparently and applied equally, not litigation. In the meantime, we’ll continue to operate our business as usual.” Paul Grewal, chief legal officer and general counsel of Coinbase. (Source)

Updates on the Lawsuits

SEC vs Binance

👉 On 7th June, SEC filed a motion seeking a TRO and preliminary injunction against BinanceUS attempting to freeze its corporate assets.

👉 On 17th June, the court rejected the TRO request. Court issued a 12-page consent order. allowing the exchange to continue its operations while the case is ongoing with certain conditions, some of which are:

• For the defendants to repatriate all assets held for the benefit of BinanceUS trading customers.
• Defendants are further prevented from spending corporate assets other than for ordinary business expenses. It also requires SEC oversight on any spending and prohibits the defendants from destroying records.
• Also obliges BinanceUS to create new digital wallets for U.S. customers and transfer assets to them within two weeks. The keys to such wallets will be handled only by BinanceUS staffs. More of that on this document.
  
  

SEC vs Coinbase

There is no significant update on this so far but here are some notable happenings relating to this case:

👉 On 6th June, Coinbase issued a letter asking SEC to address if it’s denying the Petition for Writ of Mandamus filed by Coinbase in July 2022 or if it needs more time to respond. On the same day, the court issued a short order for SEC to reply within 7 days.

👉 On 13th June, SEC asked for 120 days to respond to the writ of Mandamus.

👉 On 16th June, Coinbase issued another letter accosting SEC for continuing to dodge the rulemaking petition that is calling to establish a regulatory framework for digital assets and sought that SEC should reply to the Writ of Mandamus within 60 days (until 12th August).

Personal Conclusion

These lawsuits show the strong stance of SEC against crypto which is harming the industry as a whole. Its approach to regulation is blatant and it obviously does not have any clear direction nor rules. It is just shooting empty bullets so to speak. It would be great if SEC will cooperate with those in the industry to come up with clear and definitive solutions which are fair and transparent.

It will be interesting to see how these cases will develop. Meanwhile, I believe that the cryptospace will continue to grow, innovate, build and create more opportunities.

_{Info sources: SEC Gov: Press Release, Litigation Doc; BinanceUS Twitter; Binance Blog; Boardroom TV; CourtListerner.}

Lead image via Decrypt. No copyright infringement intended. 20062023/09:05ph

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