By
Steve Muchoki
April 24th, 2024
Binance called the SEC’s actions as somewhat vendetta rather than actual concern for safety of Binance.US customers. The exchange said it remains determined to defend itself in court.
A day after filing the lawsuit on crypto exchange Binance, the US SEC has requested the court to freeze funds of the exchange’s American affiliate Binance.US. On Tuesday evening, the SEC filed an emergency motion in Washington, D.C. federal court.
The securities regulator also requested the judge to repatriate both fiat currency and crypto held by the customers of Binance.US. The freezing order is applicable to only two of the Binance.US holding companies – BAM Trading and BAM Management. The SEC has alleged that these two companies controlled by Zhao have garnered “illicit gains” of over $400 million in profits and venture fundraising.
Additionally, the order will be applicable to dozens of accounts the exchange holds with Prime Trust, Axos Bank, the defunct Silvergate Bank, and other institutions. The SEC called the emergency restraining order necessary and would “prevent the dissipation of available assets for any judgment, given the Defendants’ years of violative conduct, disregard of the laws of the United States”.
This order compels Binance founder Changpeng Zhao to “show cause why a preliminary injunction” against Zhao and his two holding companies “should not be entered”. It would also prevent all three Binance.US entities from destroying any kind of evidence.
In the filing, the federal regulators also said that $2.2 billion worth of Binance.US customers’ funds are at “significant risk” unless the freezing order is in place. The securities regulator had alleged that “Zhao and Binance have had free reign”, over “customer assets worth billions of dollars”.
Binance and Zhao Defend Their Positions
Soon after the SEC filed for emergency motion on Tuesday evening, Binance.US was quick to respond assuring investors that the funds are SAFU. It noted: “User assets remain safe and secure and the platform continues to be fully operational with deposits and withdrawals functioning as normal.”
Binance called the filing of the preliminary injunction absolutely “unwarranted” and blamed the SEC staff for trying to obtain “an advantage in litigation versus genuine concern about the safety of customer assets”. Binance noted:
“Until recently – despite years of engagement – the SEC Staff has not expressed a concern about the safety of customer assets. And through near around-the-clock dialogue over the past week, company’s counsel addressed SEC Staff’s concerns regarding the safety of customer assets.”
Binance stated that even though they provided information to assure the SEC Staff about the safety of customer assets, the Staff still chose to file a motion for a temporary restraining order and preliminary injunction. Binance expressed disappointment in this action but remains determined to defend itself in court.