Binance.US in Trouble as SEC Strives for A Temporary Restraining Order To Freeze Its Assets, Summons CZ

It doesn’t seem a good time for Binance as just after getting sued, the US Securities Exchange Commission has requested the court for a temporary restraining order for freezing Binance.US assets, and The United States District Court for Washington, DC, has issued a summon for Binance CEO Changpeng Zhao. The action came on Tuesday when the court filing was made in the Washington D.C. district court.

SEC has requested approval to freeze assets connected to BAM Trading Services and BAM Management US Holdings, which are Binance.US’ operating and holding firms. On Monday, SEC alleged multiple control and compliance failures and sued Binance Global, Binance.US, and the founder and CEO of Binance, Changpeng Zhao. Their claims also stated that firms tied to Zhao could access Binance.US customer funds secretly.

What does the SEC Filing State?

The SEC filing said the following against Binance.US:

“The SEC respectfully submits that this relief is necessary on an expedited basis to ensure the safety of customer assets and prevent the dissipation of available assets for any judgment, given the Defendants’ years of violative conduct, disregard of the laws of the United States, evasion of regulatory oversight, and open questions about various financial transfers and the custody and control of Customer Assets – including by Defendants who claim they are not subject to the Court’s jurisdiction – as described in the Complaint, Memorandum of Law, and supporting materials.”

Other orders that SEC seeks approval for in their filings against Binance include “an order directing defendants to repatriate assets held for the benefit of BAM customers,” “show cause why a preliminary injunction should not be granted,” “an order prohibiting the destruction of records by the defendants,” etc.

The Following Steps by Binance and SEC

Late Tuesday, Binance.US tweeted to clarify their stance and claimed that user assets are secure and safe. Further, they mentioned that Binance attorneys have given SEC information concerning SEC fund safety claims.

Further, SEC filed a memorandum of law shortly after the temporary restraining order application. They emphasized several arguments from the original lawsuit, which included claims that Binance has access to Binance.US funds. It also mentioned that Binance CEO Zhao was seeking evasion from US regulators.

The SEC filing states, “Even to the extent they retain control over Binance.US Platform customers’ crypto assets, BAM Trading’s recent assertions raise concerns about its ability to properly custody them. BAM Trading has operated the Binance.US Platform for over 3.5 years, yet it only implemented formal policies for handling crypto assets last month (a timing that corresponds to when the SEC was asking about precisely those practices).”

What Will Happen if the Court Approves?

If the district court grants SEC orders, Binance.US will get five days to confirm that they do not have secret access to any funds as claimed by SEC. Further, within 30 days, they must transfer customer assets to new wallets with only Binance.US having access to them.

How the Lawsuit on Monday Altered the Course for Binance?

The court filing on Monday hinted at the request for a temporary restraining order. SEC even noted a request for “preliminary injunctive relief, including asset freezes and a verified accounting.”

The lawsuit on Monday also stated that Binance had let two companies, Sigma Chain and Merit Peak, tied to Zhao, access billions of US dollars out of customer funds held by BAM trading.

Responding to the initial lawsuit, Binance had claimed about the safety and security of user funds and that they were never at risk. They’re looking to defend any allegations vigorously and maintain their stance.

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