The U.S. Securities and Exchange Commission, or in short, SEC freeze Binance with specific steps to gain control over the assets of Binance.US, the American division of the world’s largest cryptocurrency exchange. This move was disclosed in a recently filed restraining order.
In a legal action filed on June 5th, the SEC initiated a lawsuit against Binance, Changpeng Zhao (CZ), and Binance.US, alleging violations of U.S. securities laws. Additionally, the regulatory body claimed that Binance.US had mixed customers’ funds with an entity under CZ’s control. Within the same lawsuit, the SEC provided a list of ten cryptocurrencies, including Solana (SOL) and Cardano (ADA), which it considers securities.
SEC freeze Binance: It’s a legal battle
In a notable development regarding the move where SEC freeze Binance, the filed document emphasized the need for the restraining order to effectively freeze the exchange’s assets, thereby maintaining the current state of affairs and preventing the funds from dissipating or transferring to another jurisdiction. This measure safeguards the court’s ability to grant relief through disgorgement, prejudgment interest, and civil penalties. According to the filed document,
“Defendants BAM Management and BAM Trading and their agents’ servants, employees, attorneys-in-fact, and those persons in active concert (….) shall hold and retain within their control, and otherwise prevent any disposition, transfer, pledge, encumbrance, assignment, dissipation, concealment, or other disposals whatsoever of any of their funds or other assets or things of value (…).”
Additionally, the filing through which SEC freeze Binance is made possible highlighted that BAM Trading should assume exclusive control over customer funds within five days following the court’s approval. The SEC’s primary objective is to revoke Binance’s and CEO Zhao’s authorization and involvement in any future transfers or withdrawals of assets belonging to U.S. customers. The filing also says that,
“ensure that neither Defendant Binance, nor Defendant Zhao, nor any of the Binance Entities obtains possession, custody, or control over Customer Assets, including by being designated as an account holder or signatory of any account of wallet holding Customer Assets without first obtaining leave of the Court”
In addition to the aforementioned measures, the filed document requests that Binance.US execute a transfer of all cryptocurrency assets to an alternate wallet, utilizing new private and administration keys. Furthermore, the commission stipulates that these new wallet details must not be shared with Binance, CZ, or affiliated entities. This transition is expected to be finalized within a period of 30 days from the court’s issuance of the restraining order.
Upon approval, the CEO and CFO of Binance.US will be required to provide written consent for any transfers exceeding the threshold of $100,000. Moreover, Binance.US may be permitted to transfer its staking service to either BitGo or Aegis, subject to fulfilling the conditions set forth by the SEC.
Following the SEC’s allegations, Binance.US utilized its official Twitter account to present its perspective. In a tweet, the American cryptocurrency exchange division expressed that filing the preliminary injunction was unjustified. Additionally, Binance.US conveyed its disappointment regarding the unfolding situation.
This afternoon, the SEC filed a motion seeking a TRO and preliminary injunction against https://t.co/AZwoBOgsqS attempting to, amongst other things, freeze https://t.co/AZwoBOgsqS corporate assets. User assets remain safe and secure and the platform continues to be fully…
— Binance.US 🇺🇸 (@BinanceUS) June 6, 2023
In a further response, CZ, the CEO of Binance, took to Twitter to clarify what “SEC freeze Binance” means as well as SEC’s actions, emphasizing that the regulatory actions solely pertain to Binance.US and not Binance.com. CZ sought to reassure the cryptocurrency community that their funds remained secure amid the ongoing developments.
Clarification: this could only affects https://t.co/hSHrrlF7o7, IF granted by the court.
— CZ 🔶 Binance (@cz_binance) June 6, 2023
Why does the government take such actions?
SEC freeze Binance, okay, but why exactly does this commission do such things? The U.S. SEC is responsible for enforcing laws against market manipulation to ensure fair and transparent financial markets. Through rigorous investigations and legal actions, the SEC aims to detect, deter, and punish individuals or entities engaged in manipulative practices that undermine market integrity.
By taking decisive measures like asset freezes and pursuing legal actions, the SEC demonstrates its commitment to maintaining a level playing field, protecting investors, and upholding the financial system’s integrity in the face of alleged violations. So, after all, maybe SEC freeze Binance, and other companies when needed is not really a bad thing for the public. And if you wonder what else SEC can do, check this story where we explained why SEC doesn’t want Elon Musk to tweet…