- Binance and the US SEC have submitted draft orders to sway Judge’s determination in the Emergency Asset Freeze Enforcement Action.
- Both parties try to nullify each other’s drafts, presenting their ideal briefs of the Judge’s final order.
- The conflicting submissions increase the tension as market participants hope for a temporary outcome by June 13.
- Court wants the defendant and plaintiff to continue negotiating.
Binance.US petitioned the court to turn down the SEC proposed temporary restraining order on its assets, arguing that such action would effectively bring its operations to a halt.
SEC/Binance Newsflash: Binance Fights Back— John Reed Stark (@JohnReedStark) June 12, 2023
Binance, CZ and the BAM Defendants just filed lengthy opposition pleadings to the SEC's emergency action. Find the links to two important pleadings below, which will give you a good idea of their defenses.
Should be an extraordinary… pic.twitter.com/qc5GRwHmjn
The news follows a filing turned in on June 12, where Binance.US strongly challenged the regulator’s emergency motion for a temporary restraining order, denouncing it as “overly harsh and draconian.” A hearing to address the requested restraining order was scheduled for June 13 at the US District Court for the District of Columbia.
Binance challenges the briefs proposed by the SEC
Binance.US challenges that compliance with the regulator’s restraining order demand BAM Trading Services Inc., which is the organization that provides crypto trading and exchange services for Binance.US., to terminate its operations.
Implementing this relief would primarily harm BAM’s customers, essentially shutter BAM’s operations, and prevent BAM from defending itself in this legal battle.
The platform challenges the regulator’s overall approach to pursuing legal action against the exchange, noting that none of the claims bore any merit. According to Binance.US, the regulator has not identified any one security traded on BAM’s platform.
The SEC provided no compelling basis and identified no precedential support for the extreme and punitive relief it seeks. The SEC presupposes cryptocurrency is inherently a security, but this assumption is unfounded. The fact that numerous cryptocurrency exchanges, including BAM, have operated in the United States for years without any interference from the SEC contradicts their claim that they are unambiguously subject to securities regulations.
Further, BAM contends that the regulator has failed to present evidence supporting allegations that Sigma Chain was engaged in wash trading. According to the Binance entity, the evidence comprised “conclusory” statements of an SEC legal representative and was devoid of any accompanying documentary evidence or data.
By way of background, Sigma Chain operates several independent trading strategies that perform different functions within BAM Trading’s various products. These trading strategies aim to facilitate Sigma Chain’s role as a market maker for BAM’s customers. While these strategies may interact in the market, the SEC has repeatedly recognized that this type of inadvertent self-trading between independent strategies is entirely bona fide and not improper.
In a joint counterargument by Binance and its CEO, the defendants accused the SEC of deeming the asset freeze order as an “emergency." Quoting them, “The SEC alleges that Binance.US has been operating unlawfully since its launch in 2019. It alleges that Binance.com has been operating unlawfully since its launch in 2017, including the early years when the SEC says it openly had US users. BNB launched in 2017 and traded on both platforms since their respective launches.”
On this note, the firm questions the regulator’s “move to let the platforms grow to their current size in the first place,” if at all they were illegal. Further, Binance argues that the ongoing probe on Binance and Zhao has gone on for multiple years and that regulator had never indicated any potential risk to BAM’s customer assets.
Judge asks Binance, SEC to continue with negotiations
In the latest development, the federal judge has put off the order of a temporary restraining order to freeze Binance’s assets, asking the defendant and plaintiff to continue negotiating. According to the judge, the only thing that would warrant freezing the assets is the regulator proving that no one from Binance's global platform, including CZ, had access to its private keys.
Notably, the move allows Binance.US to continue doing business while hashing out restrictions with the regulator.
Meanwhile, Binance.US must provide a list of its business expenses to the court. A status update is due by the close of business Thursday, June 15.
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