SEC Drops Lengthy Legal Battle Against Binance

By: Eva Baxter

The United States Securities and Exchange Commission (SEC) has officially moved to dismiss its two-year-long litigation against Binance and its CEO, Changpeng Zhao (CZ), marking a significant moment in the ongoing regulatory environment for cryptocurrency exchanges. According to recent court documents, this decision follows a joint stipulation for dismissal that indicates both parties have agreed to terminate the case.

The lawsuit, originally filed in June 2023, accused Binance of operating unregistered securities exchanges, inflating trading volumes, and misleading investors concerning their efforts at market manipulation prevention. These allegations were part of a broader investigation into Binance’s practices, which also included scrutiny from the US Justice Department culminated in a $4.3 billion settlement after CZ's guilty plea to Bank Secrecy Act violations, accompanied by a four-month prison sentence.

During the legal proceedings, a key development occurred when Judge Amy Berman Jackson placed the lawsuit on a 60-day hold. This pause was grounded in the SEC’s efforts to reassess the applicability of existing securities laws to digital asset platforms, driven by a crypto task force initiative led by Commissioner Hester Peirce.

Notably, Binance has complied with an earlier SEC consent order by enhancing transparency in its custodial controls and asset segregation for US customers. This cooperation paved the way for what Binance calls a significant victory for the cryptocurrency sector, emphasizing that US innovation is poised for resurgence again.

The SEC’s decision to drop the lawsuit does not include any monetary settlements, and future enforcement action on similar grounds would necessitate fresh legal filings. Despite the conclusion of this legal battle, Binance.US remains obligated to provide quarterly compliance reports and undergo third-party audits as part of the consent decree terms.

This case is emblematic of the ongoing challenges and negotiations between regulatory bodies and the rapidly evolving cryptocurrency industry as both seek to establish a framework that recognizes the nuances of digital assets.