The SEC Drops Binance Lawsuit, Signaling a Shift in US Crypto Crackdown

The US Securities and Exchange Commission (SEC) has officially ended its lawsuit against Binance and its founder, Changpeng Zhao, CNBC reported. The lawsuit was first raised in June 2023.

By dropping the SEC Binance lawsuit, the regulator brings to a close one of the remaining enforcement actions in the crypto industry. Lawyers representing Binance and the SEC agreed to dismiss the case during a filing held on May 29 in the US District Court for the District of Columbia.

The Case Against Binance

Originally, the SEC charges included allegations that Binance US users illegally. The regulator accused the cryptocurrency exchange company of inflating trading volumes, and mixing customer funds. The SEC also accused the exchange of facilitating trading in crypto assets it considered unregistered securities. The SEC has also accused Coinbase and Kraken of allowing trading of unregistered securities.

The move to dismiss the Binance lawsuit signifies a major turning point in the regulator’s crackdown on cryptos. The crypto regulatory change comes at a time when the Trump administration is softening its stance on the industry. The US Department of Justice (DoJ) has dissolved the crypto enforcement unit. Following this dissolution, the Commodity Futures Trading Commission (CFTC) will now be led by a venture capitalist with strong crypto ties.

The SEC is the last major US regulator that has been pursuing Binance following a $4.3 billion settlement last year. As part of that deal, Zhao stepped down as Binance CEO and pleaded guilty to avoid prison. The deal also allowed him to keep most of his wealth.

Clear Rules

SEC’s decision to give Binance legal triumph was undertaken in prejudice. This means that the regulator cannot file a case against the crypto exchange for the same charges. The regulator says the decision reflects a shift towards clarity in rule making following years of ambiguity.

“What we’re trying to do with the enforcement cases is look at them on a facts and circumstances basis. We didn’t have a clear set of rules. There were a lot of questions about how this particular activity in the crypto space intersected with our existing securities laws. We’re trying to take a step back, use our regulatory tools to write those rules, and then enforce those rules,” Commissioner Hester Peirce said.

Peirce was quick to add that loosening enforcement does not imply opening the industry to scammers.

“It is not time for people to think, ‘I have a free pass to go rip people off in the name of crypto.’ That is not the case.”

The new leadership at the SEC has moved away from enforcement, it is now focusing on engagement. The agency has already conducted several roundtables since the appointment of the new chairperson, Paul Atkins. The regulator has also started to deconstruct rules that have been pushing Wall Street investors away. Early this year, the agency did away with the controversial directive known as Staff Accounting Bulletin 121. The directive forced banks to treat crypto holdings liabilities on balance sheets.

CZ Binance update

Binance continues to be the biggest cryptocurrency exchange by trading volume in the world. Recently, the crypto exchange signed a partnership with World Liberty Financial (WLF). WLF is the group that is working towards becoming a crypto bank. The company sends 75% of its profits to establishments that are linked to the Trump family.

Binance has also accepted a $2 billion investment from an Emirati state fund called MGX. The investment will be made in USD1, the new stablecoin launched by WLF. Both Binance and WLF are working to expand operations to Pakistan where WLF co-founder Zack Witkoff signed an agreement with the government recently.
Witkoff is the son of Middle East envoy Steve Witkoff. At the same time, Zhao was appointed adviser to Pakistan’s new state-backed Crypto Council, which is developing national digital asset policy.