Binance civil enforcement action dismissed by SEC

Editorial

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This week, a litigation release revealed that the SEC filed a joint stipulation with Binance entities and founder Changpeng Zhao to drop, with prejudice, the ongoing civil enforcement action.

The release says: “In the exercise of its discretion and as a policy matter, the Commission determined that the dismissal of this action is appropriate. Furthermore, as stated in the joint stipulation, “the Commission’s decision to seek dismissal of this Litigation does not necessarily reflect the Commission’s position on any other litigation or proceeding.””

Celebrating the news on X, Binance posted: “Huge win for crypto today. The SEC’s case against us is dismissed.
Thank you to Chairman Atkins & the Trump team for pushing back against regulation by enforcement. U.S. innovation is back on track – and it’s just the beginning.”

This message was built upon in a blog post, which describes this as “a major win for our customers, our business, and the digital asset industry.”

The blog continues: “From the outset, we maintained that the SEC’s claims were baseless, unjustified, and politically motivated. Instead of providing regulatory clarity to help American consumers safely access the benefits of digital assets, the SEC chose instead to wage an aggressive campaign of regulation by enforcement. This approach has created nothing but harm for American consumers and businesses alike.

“There is a real and serious cost when a powerful regulatory agency like the SEC, which has a mandate to prevent fraud and ensure fair and orderly markets, instead chooses to bring unwarranted cases against companies that have not violated U.S. laws and regulations. This overreach has taken a significant toll on our business, forcing us to divert significant resources to defend against claims that never should have been brought. However, with today’s victory and new leadership in place at the SEC, a meaningful shift is underway.”

In March 2023, the US Commodity Futures and Trading Commission (CFTC) charged Binance and two of its top executives with “willful evasion of US law”, seeking penalties and permanent trading and registration bans against the digital asset firm. In June of the same year, Binance failed in its bid to secure a virtual asset service provider (VASP) license in the Netherlands, forcing the crypto exchange to exit the country. Alongside that, French prosecutors started investigating Binance for concerns regarding possible “aggravated money laundering by taking part in investment operations, concealment and conversion, the latter being carried out by perpetrators of offenses having generated profits.”

At the time, the SEC alleged securities law violations and accused the crypto exchange of engaging in an “extensive web of deception.” In October 2023, after the UK’s FCA introduced new rules outlining that firms wishing to promote cryptoassets in the UK must be authorised or registered by the FCA, or alternatively have their marketing approved by an authorised firm, Binance initially engaged Rebuildingsociety.com to review and approve financial promotions, but it soon became apparent that the company was not licensed to do this.

Late in November, Binance agreed to pay $4.3 billion in penalties and forfeitures in order to settle a long-running investigation by the US Department of Justice and other federal agencies. Founder Changpeng Zhao also plead guilty to violating anti-money laundering charges and stepped down as CEO, with Richard Teng, Binance’s head of regional markets, taking over as the new CEO.

“I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself,” Zhao posted on X at the time. Along with the Department of Justice lawsuit, Binance also settled the charges with the CFTC.