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Binance.US Says Customer Funds Are Safe As SEC Requests Restraining Order To Freeze Assets

A day after slapping Binance with a lawsuit, the U.S. Securities and Exchange Commission is now taking swift action to freeze assets tied to the American arm of the global exchange “on an expedited basis”.

However, Binance.US has clarified that it remains “fully operational” and that all customer funds are safe.

SEC File Motion To Freeze Crypto Held By Binance.US

The SEC has requested a judge to freeze Binance.US assets in a temporary restraining order filed on Tuesday.

The freeze would impact two holding and operating firms associated with Binance.US operations: BAM Management US Holdings and BAM Trading Services. According to the SEC, Binance portrayed these two firms as independent, but they were secretly controlled by the parent company and its CEO, Changpeng “CZ” Zhao.

The SEC seeks to freeze assets due to allegations claiming Zhao and other executives redirected customer funds to personal investment funds, which were used to purchase BUSD and an $11 million yacht for the Binance boss.

The court filing made in the D.C. District Court seeks the repatriation of assets — both fiat and crypto — belonging to Binance.US customers, a process that would entail the moving of assets back to the United States within 10 days.

The SEC believes the temporary restraining order 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.”

If SEC’s request is granted, the two holding firms and CZ would be required to “show cause” as to why a preliminary injunction should not be allowed, as per the court filing. It would also forbid defendants named in the SEC’s complaint from destroying, changing, or hiding any records that are relevant.

Moreover, the motion seeks expedited discovery in the suit and alternative means of service. This means the SEC would not need to serve papers in person like is typically required.

The emergency order follows the SEC’s legal action against Binance and Zhao lodged on Monday. The regulator hit the world’s largest crypto exchange by trading volume with 13 charges, accusing it of buying, selling, and trading unregistered securities, commingling customers’ funds, among other claims.

Earlier Tuesday, the SEC filed a similar lawsuit against rival crypto exchange Coinbase, alleging that it had failed to respect U.S. federal securities laws. The actions against two of the industry’s most preeminent firms appear to be part of a government crackdown on the fast-growing crypto sector.

Binance.US Hits Back At SEC Emergency Order

Binance.US has called the SEC’s asset-freeze motion “unwarranted”. The exchange argued on Twitter that it was filed as part of a plot to gain an advantage in litigation and not genuine concern about the safety of users’ funds.

“While we are disappointed by this action, we look forward to defending ourselves in court,” the company posited.

Binance.US also noted that “user assets remain safe and secure” and added the platform “continues to be fully operational with deposits and withdrawals functioning as normal.”

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