The U.S. Securities and Exchange Commission is seeking to pause its high-profile lawsuit against the cryptocurrency exchange Binance as the regulator tries to present itself as more crypto-friendly under a new administration.
Binance and the SEC filed a joint motion Monday asking for a 60-day stay in a lawsuit the regulator filed with significant fanfare two years ago under its previous chairman, Gary Gensler.
Monday’s filing in the U.S. District Court for the District of Columbia said the SEC approached Binance asking for the pause. The regulator said the work of a new crypto task force launched by Acting Chairman Mark Uyeda that’s supposed to improve ties to the crypto industry “may impact and facilitate the potential resolution of this case.”
The filing is the first “tangible action in existing enforcement actions that recognizes a change in direction of the agency,” said Carol Goforth, a distinguished professor at the University of Arkansas School of Law.
Binance is the world’s largest cryptocurrency exchange – a digital marketplace where customers can buy, sell and store different types of crypto — and the SEC’s lawsuit drew considerable attention when first filed.
Gensler said in a statement at the time that Binance and its founder, Changpeng Zhao, had engaged in an extensive “web of deception” while the SEC’s X account posted a graphic highlighting a key piece of evidence of alleged wrongdoing: a quote from Binance’s chief compliance officer saying to another employee in 2018, “We are operating as a fking unlicensed securities exchange in the USA bro.”
In a separate case, Binance later agreed to pay a roughly $4 billion settlement and Zhao pleaded guilty to a felony related to his failure to prevent money laundering on the platform.
A key issue facing the cryptocurrency industry is whether certain digital assets should be regulated as securities – a position that the SEC under Gensler supported while many in the crypto industry are opposed.
Cryptocurrencies are a kind of electronic cash that have moved from the financial fringes to the mainstream in rapid fits and starts, despite being marred by scandals and market meltdowns.
The SEC has targeted crypto exchanges like Binance, Coinbase and others for allegedly operating unregistered securities exchanges. That scrutiny came after the high-profile meltdown of FTX, the exchange founded by disgraced crypto mogul Sam Bankman-Fried.
The industry said it was unfairly treated by the Biden administration, and Gensler in particular, and spent heavily to help Trump and Republicans in the last election. Trump and GOP lawmakers have signaled their eagerness to help the crypto industry with friendly legislation and light-touch regulations.
Uyeda launched the new crypto task force last month, saying the agency needed a reset in its approach to crypto.
“To date, the SEC has relied primarily on enforcement actions to regulate crypto retroactively and reactively, often adopting novel and untested legal interpretations along the way,” the agency said in announcing the task force. “Clarity regarding who must register, and practical solutions for those seeking to register, have been elusive.”
Legal experts said the pause in the Binance case could indicate similar changes in the SEC’s ongoing legal action against other crypto exchanges.
“I would expect that all of these cases will be either dismissed outright or settled on very favorable terms to the defendants,” said James Murphy, a securities law expert.
That’s bad news, said Corey Frayer, a former SEC official who recently left the agency.
“The SEC delaying what appears to be a slam dunk case in Binance while welcoming crypto’s return to its pre-FTX days is a bad omen for any other ongoing crypto litigation,” he said.
In a statement, Binance said the SEC’s case “has always been without merit” and praised Uyeda for “his thoughtful approach to ensuring digital assets receive the appropriate legislative and regulatory focus in this new, golden era of blockchain in the U.S. and around the world.”
—Alan Suderman, AP business writer
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