US SEC drops lawsuit against crypto giant Binance, founder Zhao - Here’s why

The US Securities and Exchange Commission(SEC) on Thursday voluntarily ended its two-year-long battle against cryptocurrency exchange Binance Holdings Ltd and its majority shareholder, Changpeng Zhao. The move reflects a potential shift in cryptocurrency policy under President Donald Trump, as per a Reuters report.

Why did the SEC sue Binance?

The SEC sued Binance and the company’s co-founder Changpeng Zhao in June 2023, accusing the exchange company of artificially inflating trading volumes, diverting customer funds and misleading investors about its surveillance controls, reported Reuters. Binance was also accused of unlawfully facilitating the trading of several cryptocurrency coins that the SEC leadership during President Joe Biden's administration believed should have been registered as securities.

Why did the SEC dismiss the lawsuit after two years?

On Thursday, a joint stipulation of dismissal signed by lawyers for the SEC, Binance and Binance founder Changpeng Zhao was filed in the Washington, DC, federal court.

The SEC said dismissing the case was appropriate "in the exercise of its discretion and as a policy matter," and did not reflect its view on other cryptocurrency litigation. The dismissal, filed with prejudice, means the SEC cannot reopen the case, reported Reuters.

A joint request was filed by the regulator and Binance’s co-founder, Zhao, in February to pause the lawsuit for 60 days. At the time, the SEC and Zhao said then-acting Chairman Mark Uyeda’s formation of a special agency task force to set crypto regulatory policy warranted a pause. The task force’s work could impact the lawsuit’s resolution, as reported by Bloomberg.

Binance's response 

Following the dismissal, Binance called it a “huge win for crypto” on social media platform X (formerly Twitter) and thanked SEC Chair Paul Atkins and US President Donald Trump “for pushing back against regulation by enforcement.” A Binance spokesperson also called it a “landmark moment.”

This is the second time Binance has been involved in a legal battle. In a separate case in November 2023, Binance pleaded guilty and was slapped with a $4.32 billion criminal penalty for violating federal anti-money laundering and sanctions laws through loopholes in internal controls.

Zhao pleaded guilty to anti-money laundering violations and was released from prison last September after serving a four-month sentence. At that time, Zhao agreed to step down as the CEO. This case followed a years-long investigation by the US Department of Justice, the US Commodity Futures Trading Commission and the Treasury Department.