Binance.US is ready to fight the baseless accusations from the SEC before court.
The Crypto Exchange Fights Back
Binance.US, the US affiliate of cryptocurrency exchange Binance, has addressed the Securities and Exchange Commission’s (SEC) accusations in court. The SEC had filed a civil enforcement action against the crypto exchange, claiming fraud, market manipulation, and misleading customers about asset location and safety. The exchange states that it has been cooperating with the SEC’s investigation since 2020.
Cooperation with SEC Investigation
Binance.US emphasizes that it has made significant efforts to cooperate with the SEC’s investigation since December 2020. However, the SEC argues that the crypto exchange has not provided satisfactory answers about the storage of customer assets.
Pushback on SEC Claims
Binance.US has filed a court response challenging the SEC’s allegations. This is the first time the US affiliate has pushed back against the SEC’s claims. The SEC accused the crypto exchange and its parent company of redirecting over $12 billion in customer assets to funds controlled by Changpeng ‘CZ’ Zhao, the owner and founder of Binance. Similar allegations were made against other entities such as Sam Bankman-Fried, FTX, and Alameda Research.
#BREAKING 🚨 @cz_binance
To Fight SEC #Binance to hire the best defense attorneys in the world.#BTC #BNB pic.twitter.com/97YOm32S2v
— BITCOINLFG® (@bitcoinlfgo) June 12, 2023
Defense against Commingling Allegations
In response to the SEC’s claim that Binance.US commingles customer assets with funds controlled by Zhao, Binance.US’s parent company, BAM Trading, asserts that it keeps customers’ fiat currency in segregated accounts maintained with banking partners, separate from corporate funds. Although Zhao owns BAM Trading’s bank account, Binance.US claims he does not have signatory authority over it. The SEC argues that Zhao’s control over the bank accounts suggests a lack of separation between Binance and Binance.US.
Preparation for Hearing
Binance.US’s court filing is in preparation for an upcoming hearing regarding the SEC’s request for a temporary restraining order on the crypto exchange. The order, if granted, would freeze the US affiliate’s assets, except for customer withdrawals. The SEC also wants Binance and Binance.US to provide a complete financial accounting.
Binance US Challenges Asset Freeze
Binance US, the US version of Binance, has filed documents in a lawsuit against the SEC, refuting the SEC’s allegations. The company argues that the SEC’s request to freeze Binance US assets is unjustified. Binance US denies the SEC’s claim that it did not segregate customer assets.
BREAKING: An @SECGov effort to freeze https://t.co/8DjbW30nE5’s funds is a “draconian and unduly burdensome” move, the U.S. affiliate of the global crypto exchange argued Monday.@nikhileshde reportshttps://t.co/lznMIOtM27
— CoinDesk (@CoinDesk) June 12, 2023
Unnecessary and Unreasonable Request
Binance.US states that the SEC’s request to freeze the assets of its operating companies is unnecessary and unreasonable. Binance and its CEO, CZ, explain that Binance US Operating Company (BAM) is prohibited from transferring assets to affiliates. Binance proposed to the SEC that BAM would retain exclusive ownership and control over customer assets and preserve related documents. However, the SEC rejected the proposal, citing unclear risks to customer assets. Binance US argues that the asset freeze measures would harm customer assets.
Negative Impact on Business Operations
Binance US points out that the SEC’s proposed actions would effectively end BAM’s business. The SEC is seeking burdensome and coercive measures to freeze all business operations of Binance US. Such actions would primarily harm BAM’s customers, put BAM out of business, and prevent BAM from defending itself in the lawsuit. Freezing the operating company’s funds would make it impossible to pay employees and vendors, rendering the platform unsustainable. Additionally, partner banks are likely to refuse requests for funds transfers, including customer asset redemption.
Separation of Assets
Binance US rejects the SEC’s allegations that the company did not segregate customer assets. BAM’s lawyer responds that customer fiat currency is stored in segregated accounts managed with banking partners, separate from other company funds. Binance US confirms that CZ owns BAM’s bank account but argues that he does not have signing authority for it. The SEC claims that CZ is one of the individuals controlling BAM’s bank accounts, implying a lack of asset segregation between Binance and Binance.US.
🚨 NEWS – Today I filed the SEC Stabilization Act to restructure the @SECGov and #FireGaryGensler.
U.S. capital markets must be protected from a tyrannical Chairman, including the current one. It’s time for real reform and to fire @GaryGensler as Chair of the SEC. Statement ⬇️ pic.twitter.com/0VUHxUAhtB
— Warren Davidson 🇺🇸 (@WarrenDavidson) June 12, 2023
Conclusion
Binance.US is actively defending against the SEC’s allegations, highlighting its cooperation with the investigation and refuting claims of fraud and market manipulation. The court will hold a hearing regarding the SEC’s asset freeze request, and Binance continues to challenge the charges, raising concerns about due process and the SEC’s enforcement approach.
