Attorney John Deaton, managing partner of Deaton Law Firm, said District Judge Amy Berman Jackson has denied the U.S. Securities and Exchange Commission's (SEC) request for an emergency temporary restraining order (TRO), which the SEC would have used to freeze the assets of crypto exchange Binance.US.
On June 6, the SEC “filed an emergency action application seeking a temporary restraining order freezing assets, directing defendants to repatriate assets held for the benefit of customers of the Binance.US crypto trading platform, and seeking other emergency relief" related to Binance and its associated entities, according to a press release.
"Binance did the right thing. Binance came in and said, 'Here are all the customer accounts in the United States of U.S. investors, here's the private keys, U.S. government, SEC. They're protected 100%. You're in control. We can't touch the money, but don't freeze us.' The SEC's initial response: no. Because they want destruction [...] and the judge was taken aback by the SEC being so unreasonable," Deaton said on The Wolf of All Streets podcast.
In a court filing, Binance outlined the three main reasons the court should deny the SEC's request. First, Binance said, the relief requested by the SEC is “unwarranted and improper." Binance noted that the SEC “must carry the burden of establishing a right to the relief it requests,” which Binance said the SEC had failed to do. Second, the SEC’s request to freeze user assets is “untethered” to the SEC’s complaints against the company, which are alleged registration violations. “The SEC’s brief does not identify a single instance in which BAM customer assets were mishandled or misused,” the filing states. Third, Binance said the “SEC has failed to show the requisite likelihood of success as to the registration claims.” The filing states that the regulator “does not have authority to require registration when it has not answered the threshold question of what cryptocurrency assets, if any, constitute securities under federal securities laws.”
Judge Amy Berman Jackson denied the SEC's request, instead directing the SEC and Binance to reach a compromise that would allow the exchange to continue its operations while the civil litigation is ongoing, the New York Times reported. The judge described the SEC's reliance on litigation in the crypto industry as "inefficient and cumbersome." Professor Carl Tobias of the Richmond School of Law suggested that the SEC's requested asset freeze may have been intended to serve as a message to the crypto industry at large. “It’s part of reasserting the SEC’s authority to regulate in this area,” Tobias said.
One attorney said on Twitter, “The judge, apparently, caught on that there was no actual emergency. I am told the judge pressed the SEC lawyers on whether they had any actual evidence of @BinanceUS customer assets being moved overseas. They had none. Round 1 to @Binance and @cz_binance.”
The state of Florida has enacted regulations for cryptocurrency that took effect Jan. 1, including licensing requirements for transmitters, JDSupra reported.