The Securities and Exchange Commission's (SEC) Monday effort to freeze Binance US funds is a “draconian and unduly burdensome” measure, the global cryptocurrency exchange's U.S. affiliate said on Monday. insisted.
“If the court takes up the merits of the SEC's complaint, it should dismiss the complaint. The SEC is seeking unnecessary and unwarranted relief, a relief that is “carefully calibrated'' to “preserve.'' Far from demanding it.”[] “The status quo…the SEC’s proposed remedies would effectively end BAM’s operations,” Binance.US’ motion asserted.
BAM Trading Services is the name of the organization that operates Binance.US. According to the SEC, the company is owned by BAM Management US Holdings, which is majority owned by Binance founder Changpeng “CZ” Zhao.
The SEC said last Monday that Binance, Binance.US, and Zhao were using unregistered securities exchanges to allow U.S. customers to buy and trade certain virtual currencies that regulators said were unregistered securities. , a broker, and a clearinghouse, were sued for allegedly operating them as a single entity. The SEC also alleges that Binance (a global exchange) and its founder Mr. Zhao accessed the funds of Binance.US customers and transferred millions of dollars to companies such as Merit Peak and Sigma Chain (two companies owned by Mr. Zhao). He claimed that he was able to transfer it to another organization.
Binance and Binance US had already denied the allegations in blog posts and tweets last week, but Monday set a deadline for a formal court-ordered response. The United States District Court for the District of Columbia will hold a hearing on this motion on Tuesday, June 13th at 2:00 PM ET.
In Monday's filing, Binance.US' lawyers said that freezing funds would “primarily harm BAM's customers, effectively putting BAM out of business, and will be unable to defend themselves in this lawsuit.” It can even preserve the parties and their technology.
The freeze could also upset Binance US's banks, one of which has already announced it will stop doing business with the company, the filing said.
Over the past week, Binance, Binance.US, and Zhao added lawyers to their court dockets, including George Kanellos, a former Justice Department prosecutor and former co-director of the SEC's Enforcement Division.
Binance.US has proposed alternative terms that it asks the judge to agree to, requiring the company to return all assets to the “ownership, custody, and control” of BAM Trading, and ensure that they are accessible only to Binance.US employees ( This would exclude Zhao) ) and ensure that no one else can access these funds from the global Binance exchange.
Within two weeks, Binance.US will require all funds to be transferred to the new wallet.
The provisions proposed by Binance.US fall short of the full asset freeze sought by the SEC and would allow the company to continue paying its employees and vendors, but would prohibit payments to other Binance entities. Become.
Binance.US' filing also stated that the SEC “does not identify securities trading taking place on BAM's platform,” indicating the company's opposition to broader SEC litigation.
“While the SEC has suggested that it is a foregone conclusion that cryptocurrencies are securities, this is not the case. Numerous crypto exchanges, including BAM, have The fact that they have been in operation for years belies the claim that they are securities and are clearly subject to securities laws,'' the filing states.
The SEC found that Binance.US did not demonstrate that it sold BNB as an investment contract, even though it was the only asset on the Binance.US platform that it noted was an unregistered security for purposes of the SEC motion. the company's filing claims.
It also quoted SEC Chairman Gary Gensler, who told Congress in May 2021 that there is no regulatory framework for cryptocurrencies, but Binance.US's filing omits the chairman's statement. .
“I would like to work with Congress, which I think is the only one that can really address this issue, but if you listen to my thoughts, consider whether to give crypto exchanges more investor protection. I think that's a good thing to do.'' Gensler's full quote reads: “If that's the case, I think, because at this point the exchanges that trade these crypto assets have a lot more confidence in both the SEC and our sister agency, the Commodity Futures Trading Commission. Because we don't have a regulatory framework that can give us that. At the moment, there's no market regulator for these crypto exchanges, so they don't really have any protection against fraud or manipulation.”
Monday's filing also echoes public statements that said Binance and Binance.US were cooperating with the SEC prior to last week's enforcement action.
“Until very recently, the SEC did not express concerns to BAM in furtherance of its claims despite being provided with material information regarding BAM's asset management,” the filing states. If the assets are misused or mishandled. Over the past few weeks, the SEC has inexplicably begun to focus on the custody of BAM's assets, but BAM continued to cooperate in good faith and work around the clock to answer the SEC's questions. ”
In a joint memorandum supporting Binance.US' application, Binance Holdings and Mr. Zhao insisted there was “no risk.” [Binance.US] “Customer assets,” he said, adding that there was no need for emergency measures.
Similar to Binance.US, the filing, also published on Monday, claimed that the SEC had allowed Binance and Binance.US to operate without any prior enforcement action since their respective launches.
“If they were always illegal, why did the SEC allow these platforms to grow to their current size?” the submitter asked. “And why did this sudden ‘state of emergency’ coincide with the SEC’s attack on the entire cryptocurrency industry, with Binance and Coinbase being sued in quick succession?”
According to the filing, the SEC had not previously raised any concerns about Binance.US' assets or Zhao's access to Binance, but concerns were later raised for the first time on May 30, 2023, when the lawsuit was filed. He said it was just a few days before he woke up.
Additionally, the SEC's charges are about registration violations and management issues, not about misuse of funds, the filing alleges.
Binance also disputes the SEC's assertion that the company is a clearing house or exchange for SEC purposes, stating that it “does not operate Binance.US” and instead operates a service for a U.S. crypto trading platform. He said he is acting as a provider.
Updated (June 12, 2023, 21:20 UTC): Adds details from the filing, including Binance.US's proposed regulations.
Updated (June 12, 21:50 UTC): Added Binance Holdings filings.
