SEC Backs Down From Binance, Zhao Case Citing Discretion, New Crypto Strategy

The U.S. Securities and Exchange Commission (SEC) has requested the dismissal of its high-profile lawsuit against global crypto exchange Binance and its co-founder Changpeng “CZ” Zhao, signaling a potentially significant turn in the agency’s crypto enforcement era.

In a joint motion filed on May 29 in a Washington, D.C., federal court, the SEC, alongside Binance and Zhao, formally asked for the case—initially launched in June 2023, to be terminated “with prejudice,” a legal stipulation that would prevent the same lawsuit from being refiled.

Background of the SEC’s Action

The SEC’s lawsuit originally accused Binance, its U.S. arm BAM Trading, and Zhao of multiple securities law violations. These allegations included the misuse of customer assets and providing misleading information to investors.

Related: FTX Sues Binance and CZ for $1.8 Billion; Alameda Research Targets Waves Founder

The progression of this notable case saw a pause earlier this year, in February, and again in April, as the SEC’s recently established Crypto Task Force reportedly re-evaluated its ongoing enforcement strategies.

Task Force Developments Influence Dismissal

According to the recent court filing, developments within this Crypto Task Force “might impact and facilitate the potential resolution of this litigation.” The SEC further elaborated that its decision to dismiss the complaint was made “in the exercise of its discretion and as a policy matter,” indicating a deliberate choice rather than a defeat on merits.

This move to end the civil lawsuit is distinct from Binance and Zhao’s prior legal resolution in November 2023. In that separate instance, the exchange and its former CEO pleaded guilty to U.S. criminal and civil charges related to anti-money laundering and sanctions violations, resulting in a landmark $4.3 billion penalty. However, that comprehensive settlement did not cover the SEC’s civil claims, which had remained active until this recent motion for dismissal.

A Reflection of Evolving Regulatory Winds?

The SEC’s decision to withdraw its case against Binance and Zhao emerges amid what appears to be a broader recalibration of regulatory policy concerning the digital asset sector, reportedly influenced by the current Trump administration. Observers note that since President Trump’s return to office, there has been a discernible rollback or reassessment of several high-profile enforcement actions initiated under the previous Biden-era leadership.

Under former SEC Chair Gary Gensler, appointed by President Biden, the agency adopted a notably assertive stance, pursuing aggressive legal actions against numerous digital asset platforms between 2021 and 2024. Major exchanges like Binance, Coinbase, and Kraken, among others, found themselves in the SEC’s crosshairs during this period, primarily over allegations of offering unregistered securities via digital tokens.

Related: Binance, CZ Face Lawsuit Over Money Laundering Allegations in Seattle Court

In contrast, the current administration has signaled a different posture, aligning with President Trump’s publicly expressed support for the digital asset industry. Consequently, the SEC appears to have shifted to a more cautious enforcement approach, leading to a reduction in the number of active investigations and litigations against crypto firms.