Syed Rahman and Ulrich Schmidt outline the latest chapter in the long-running saga
The US Securities and Exchange Commission (SEC) has asked the US District Court for the District of Columbia to terminate a lawsuit against cryptocurrency platform Binance.
The SEC has decided to drop the case the crypto exchange was facing for allegedly breaching securities laws. The lawsuit against Binance’s founder and former chief executive Changpeng Zhao and its US-based affiliate company BAM Trading are also being dropped.
SEC said the decision was taken “in exercise of its discretion and as a policy matter” but added that it “does not necessarily reflect the Commission’s position on any other litigation or proceeding”.
Binance said in a statement that the SEC’s termination of the lawsuit was a “huge win for crypto” and that “US innovation is back on track’’.
In February, the SEC and Binance had jointly asked a district judge to pause the litigation. This came after the SEC’s launch of a new Crypto Task Force, with what it described as a new approach to crypto regulation and plans to ensure that enforcement resources are used “judiciously”. Binance had told the court that the creation of the new task force may facilitate the potential resolution of the case. The court granted the pause and extended it in April.
Complaint
The SEC’s original civil complaint against Binance was filed two years ago. It alleged that the crypto exchange unlawfully offered its services to US customers without its permission and failed to follow basic rules designed to prevent fraudulent and manipulative activity on the exchange.
Damning comments emerged, such as Binance's chief compliance officer bluntly admitting to another Binance compliance officer in December 2018 that it was operating as an unlicensed securities exchange in the US. However, the following month, a judge dismissed one of the SEC’s 13 civil counts against Binance, finding that it had failed to make a plausible case that secondary sales of Binance’s crypto assets on other exchanges violated securities laws. But the judge ruled that the bulk of the lawsuit could continue - which it did until this year.
In November 2023, Binance pleaded guilty to criminal charges as part of a $4.3 billion settlement with the US Department of Justice, the Commodity Futures Trading Commission, the Financial Crimes Enforcement Network and the Office of Foreign Assets Control to resolve claims that it had knowingly operated in the US without authorisation and ignored anti-money laundering and sanctions laws. Changpeng Zhao agreed to resign from his position in the company, plead guilty to money laundering and pay a $50million fine. But he retained his 90% ownership of Binance.
Trend
The SEC’s decision continues a trend that is in line with the Trump administration’s promise to be “pro-crypto”. The administration has recently dropped multiple investigations against large crypto companies, many of which had made large donations to the Trump campaign during the presidential race. Large, well-known companies such as Coinbase, OpenSea, Robinhood, Uniswap Labs and Gemini Trust had all been investigated before the Trump administration brought these proceedings to an end.
The SEC’s decision was, therefore, predictable. But this should be a cause for concern for consumers. In 2023, then US Treasury Secretary Janet Yellen stated that “Binance turned a blind eye to its legal obligations in the pursuit of profit. Its wilful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform”. It remains to be seen whether the compliance measures instituted by Binance will now be sufficient to stop such activities taking place.
