SEC Pushes For Emergency Order to Freeze Binance.US Assets, Says $2.2 Billion of Assets in Risk
A day after the lawsuit on crypto exchange Binance, the U.S. Securities and Exchange Commission (SEC) filed for an emergency motion in the Washington D.C. federal court on Tuesday evening, June 6, while requesting the judge to freeze the assets of Binance.US.
This freezing order will be applicable to only two of the holding companies of Binance.US and not to its non-US global exchange. The two Binance.US entities under the SEC’s scrutiny include BAM Trading and BAM Management.
Besides, the court order would be also applicable to dozens of accounts held by Binance.US at the defunct Silvergate Bank, Axos Bank, Prime Trust, and other institutions.
In the lawsuit, the SEC has slapped charges on Binance on thirteen different counts including charges of defrauding investors, operating as an unregistered broker, dealer, and clearing house, and much more.
As per the SEC, the emergency restraining order was necessary to “prevent the dissipation of available assets for any judgment, given the Defendants’ years of violative conduct, disregard of the laws of the United States.”
It also forces Binance chief Changpeng Zhao to “show cause why a preliminary injunction” against as well as his holding companies “should not be entered”. The restraining order would also prevent all three Binance.US affiliated companies from destroying evidence.
In their Tuesday night filing, the federal regulators noted that $2.2 billion of U.S. customer assets held by Binance are at “significant risk” of being stolen by founder Changpeng Zhao. The recent filing by the SEC describes Zhao as a “foreign national who has made overt his views that he is not subject to the jurisdiction of this Court.”
According to the SEC lawyers, two Binance U.S. subsidiaries, BAM Trading and BAM Management, were under the control of Zhao and had reportedly accumulated "illicit gains" of over $420.4 million through profits and venture fundraising.
“Zhao and Binance have had free reign,” over “customer assets worth billions of dollars”. The SEC told the court that Zhao’s attorneys have been claiming that the billionaire is not subject to U.S. law, despite him having control over Binance.US.
The filing further added: “Given the history of Zhao’s and Binance’s open desire to avoid U.S. regulation and oversight, and their surreptitious control over BAM Trading and commingling of and movements of BAM Trading assets through a web of Zhao-controlled entities outside of the United States, there can be no assurance that BAM Trading employees are not influenced by Zhao or Binance today”.
Crypto exchange Binance responded to the fresh charges by the SEC. It assured the users of Binance.US that “User assets remain safe and secure and the platform continues to be fully operational with deposits and withdrawals functioning as normal”.
Binance blamed the SEC calling the preliminary injunction as “unwarranted” with the SEC staff seeking to gain an advantage in the litigation instead of having actual concerns for the security of the customers’ assets.
Binance.US said: “Until recently – despite years of engagement – the SEC Staff has not expressed a concern about the safety of customer assets. Despite the information the company has provided to ensure SEC Staff of the safety of customer assets, the Staff has nonetheless decided to file the motion seeking a temporary restraining order and preliminary injunction. While we are disappointed by this action, we look forward to defending ourselves in court".