SEC Files Emergency Application for TRO to Freeze Binance.US Assets

SEC Seeks Emergency Relief to Ensure Binance.US Customers’ Assets are Protected

The Securities and Exchange Commission today 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 against Binance Holdings Limited, BAM Trading Services Inc., BAM Management US Holdings, Inc., and their founder, Changpeng Zhao, to ensure that Binance.US customers’ assets are protected and remain in the United States through the resolution of the SEC’s pending litigation of this matter.

As part of the SEC’s emergency motion, the SEC seeks (1) an order to show cause why a preliminary injunction should not be granted as to the defendants; (2) an order freezing the assets of BAM Management; (3) an order directing the defendants to repatriate assets held for the benefit of BAM Trading’s or BAM Management’s (together “BAM”) customers; (4) an order for other relief concerning the custody and control of BAM customers’ assets; (5) an order prohibiting the destruction of records by the defendants; (6) an order requiring sworn accountings of certain assets from the defendants; (7) an order authorizing expedited discovery from the defendants; and (8) an order granting alternate means of service.

SEC Chief Gary Gensler: US Doesn’t ‘Need More Digital Currency’ Because It Has the Dollar

The U.S. doesn’t need any more digital currency, said the Securities and Exchange Commission chief Gary Gensler, as his agency sues Binance and Coinbase for operating unregistered securities exchanges.

In an interview with CNBC on Tuesday, Gensler denied claims his approach was muddying the legal position around crypto, and also suggested there were parallels between his case against Binance Chief Executive Officer Changpeng “CZ” Zhao and the criminal case against FTX founder Sam Bankman-Fried.

“We don’t need more digital currency… we already have digital currency, it’s called the U.S. dollar,” Gensler said. “We have not seen, over the centuries, that economies and the public need more than one way to move value.”

SEC’s Coinbase, Binance cases draw big-name defense lawyers

Coinbase’s defense lawyers include William Savitt of Wachtell, Lipton, Rosen & Katz. Savitt, co-chair of the firm’s litigation group, represented Twitter in its clash in Delaware court with Elon Musk over his $44 billion acquisition of the social media site.

Coinbase also has a former Trump-era SEC enforcement leader, Steve Peikin of Sullivan & Cromwell, as a defender.

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Binance chief executive Changpeng Zhao will be defended by Latham & Watkins partner Douglas Yatter, vice-chairman of the firm’s white-collar defense group.

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Binance Holdings is represented by Richard Grime of Gibson, Dunn & Crutcher, and BAM Trading Services, the operator behind Binance.US, hired William McLucas of Wilmer Cutler Pickering Hale and Dorr.

Grime is the co-leader of his firm’s securities enforcement group, and McLucas is a former SEC enforcement division director.

U.S. Judge Gives SEC 7 Days to Respond to Coinbase (COIN) Suit on Rulemaking

In April, Coinbase filed an Administrative Procedure Act challenge asking the court to force the SEC’s hand and get the regulator to respond to its 2022 petition for formal rulemaking in the digital assets sector, arguing that the existing requirements are ill-suited for digital assets.

Now, the SEC has been ordered to explain within 7 days if it intends to decline Coinbase’s request, the reasons for such a decision, or a timeline of when it expects to come to a decision.

The SEC Comes for Crypto

And so one question about this week’s cases is: Is the SEC suing Coinbase and Binance for being crypto exchanges, or for being bad crypto exchanges? Is the claim here “you let people trade crypto, which we think is illegal,” or is it “you let people trade crypto and steal their money”?

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This might work out well for Coinbase: It might be able to go to court and portray itself as a good actor who tried to follow the law, while Binance looks like a bad actor who tried to ignore the law; Coinbase might win against the SEC and Binance might lose. But I have to say that, so far, Binance’s approach seems smarter. (Though obviously don’t put it in writing, etc.) Binance noticed that it’s illegal to run a crypto exchange in the US, and did it anyway, but minimized and compartmentalized its US exposure: It has relatively few US customers and seems to keep most of its business out of the US. Coinbase went all-in on the possibility of running a legal and regulatorily compliant crypto exchange in the US, and now the SEC has said that that’s impossible. If the SEC is right, what is left for Coinbase?

Drawing lines in a borderless world: applying Morrison to crypto

As the number of litigations involving digital assets continues to rise, courts have increasingly grappled with how the U.S. securities laws apply to novel fact patterns that, in many instances, involve conduct occurring outside the U.S. Step one in this analysis is to determine whether they apply at all.

Robinhood Reviews Crypto Offerings After Binance, Coinbase Crackdown

Robinhood Markets Inc. is taking a fresh look at its cryptocurrency offerings after the Securities and Exchange Commission cracked down this week on two top digital asset trading platforms, Dan Gallagher, the firm’s legal chief, told Congress Tuesday.

The brokerage is “actively reviewing” the regulator’s analysis “to determine what, if any, actions to take,” Gallagher, himself a former SEC commissioner, testified before the House Agriculture Committee during a meeting focused on digital assets.

Guest Post: Monitoring Cash Flows: The Board, the CLO, and the CFO

The recent, ongoing developments regarding the survival of certain banks, and perhaps even the future shape of the banking industry as a whole, stand as a testament to the fact that the CEO, CFO, and the general counsel (“GC”) and CLO must join with the board and others in focusing on operational and capital cash flows. Indeed, both the CEO and CFO were named as defendants in securities litigation arising from the failures of Silicon Valley Bank and Signature Bank. Too often, companies deemed to be healthy have not focused on cash flows, which are often the critical indicator of a company’s ability to survive. Troubled companies understand the importance of the cash flows—for some, unfortunately, when it is too late.