Binance, Binance.US and the Securities and Exchange Commission (SEC) announced an agreement late Friday to ensure that only Binance.US employees have short-term access to client funds.
Under the proposed agreement, which is subject to the approval of the federal judge in charge of the case, Binance.US will take steps to ensure that no officials from Binance Holdings (meaning the global exchange) have access to private keys for their various wallets, Hardware wallets or root access to Binance.US Amazon Web Services tools. Additionally, the US-based crypto trading platform will be releasing detailed information on its business expenses, including estimated costs, in the coming weeks.
The proposed deal comes in response to a request by the SEC to freeze all Binance.US assets while the exchange continues due to securities fees. The regulator said it was concerned that if it is not granted an injunction (TRO), funds could be moved abroad or records destroyed. Binance.US lawyers refused, saying freezing all assets was tantamount to the “death penalty.”
Judge Amy Berman Jackson of the District Court for the District of Columbia told the parties that it would be better for them to agree on a proposed provision than for them to issue an injunction, giving them two weeks for a fuller hearing. Two weeks would not be enough given the more than 4,000 pages of evidence the parties have already filed, she said during a hearing earlier this week.
Additional terms of the proposed agreement include Binance.US creating new crypto wallets that global exchange staff will not have access to, providing the SEC with additional information, and agreeing to an expedited discovery plan.
US-based customers can still withdraw funds during this time.
If passed, the proposed agreement will address some of the concerns raised by the SEC as the broader lawsuit it has filed makes its way through the justice system. The SEC last week sued Binance and Binance.US for allegations of offering and trading unregistered securities, but also for alleged massive commingling of funds and bad practices. The proposed agreement does not address the broader lawsuit.
UPDATE (June 17, 2023, 05:50 UTC): Adds further context on the role of the temporary agreement in the broader SEC lawsuit.