Washington, D.C. federal judge was asked by the SEC to freeze the assets of Binance’s U.S. subsidiary Binance.US, alleging that the company and its founder Changpeng Zhao held a “disregard” for U.S. law. The emergency order was filed late Tuesday night and would also force the repatriation of “fiat currency and crypto assets deposited, held, traded, and/or accrued by customers on the Binance.US crypto asset trading platform.”
Can’t ignore rules
The freezing order only applies to Binance’s two U.S. holding companies, not to the non-U.S. regulated international exchange. The court order would apply to dozens of accounts held at Axos Bank, the defunct Silvergate Bank, Prime Trust, and other institutions.
The motion, in a filing to the U.S. District Court for the District of Columbia, comes a day after U.S. regulators sued Binance and its CEO, Changpeng Zhao for allegedly operating a “web of deception,” heaping further pressure on the world’s biggest cryptocurrency exchange. In the motion, the SEC accused Binance of years of violative conduct, including “disregard” for U.S. laws and “evasion of regulatory oversight.”
The SEC alleged on Monday Binance artificially inflated its trading volumes, diverted customer funds, failed to restrict U.S. customers from its platform and misled investors about its market surveillance controls. Binance is also facing U.S. legal actions by the Commodity Futures Trading Commission (CFTC) and the Justice Department.
Two foreign entities also controlled by Zhao, Sigma Chain and Merit Peak, served as conduits for billions of dollars of customer money that was improperly commingled with Binance’s funds, the SEC has alleged.
The SEC filed suit against Binance and Zhao on Monday, alleging on 13 separate counts that the exchange and Zhao had worked to defraud investors, improperly commingle funds, and operate as an unregistered broker, dealer, and clearing house.
In the filing, the regulator also called on the court to order Binance.US from destroying or altering records.
Binance.US assets
The holding company of Binance is based in the Cayman Islands. Binance.US is its U.S. affiliate. Binance said the SEC’s motion only concerned Binance.US. After the SEC filed the motion, Binance.US said its user assets would remain safe and the platform would continue normal deposit and withdrawal operations. It added it would defend itself in court and called the SEC’s step “unwarranted.”
The motion comes a day after the SEC sued global crypto exchange Binance and its CEO Changpeng Zhao for securities violations, including allegations that Zhao and Binance secretly controlled its U.S. affiliate Binance.US and commingled billions of dollars of user assets. The SEC also sued Coinbase on Tuesday, alleging that the company is an unregistered securities exchange, broker and clearing house.
