Federal regulators claimed in a filing on Tuesday night that founder Changpeng Zhao poses a “significant risk” of stealing the $2.2 billion in U.S. client cash held by Binance unless a freezing order is in place. The Securities and Exchange Commission has filed charges against the cryptocurrency regulator.
Attorneys for the SEC had filed an emergency application, asserting a risk of capital flight and asking the judge to repatriate and freeze U.S. customer assets, in order to prevent Zhao or Binance enterprises from undertaking unauthorized transfers of U.S. customer assets. On Monday, the SEC filed a lawsuit against Binance and Zhao, charging that they had mixed investor funds with their own and made unregistered securities offers and sales.
Zhao was identified as a foreign national who has publicly stated his belief that he is not subject to the jurisdiction of this Court in the most recent submission. Two Binance U.S. firms, BAM Trading and BAM Management, were allegedly under Zhao’s control and had made “illicit gains” of at least $420.4 million through earnings and venture capital financing.
According to the complaint, the SEC and Binance have been in contact for years despite Binance’s claim that it has no formal headquarters. This suggests that Binance.US was unable to identify who exactly controlled customer funds.
The SEC said that Zhao and Binance had unrestricted access to client assets worth billions of dollars.
Despite having control over or beneficial ownership of U.S. businesses and bank accounts that transported billions of dollars to holding companies in Switzerland and the British Virgin Islands, Zhao’s lawyers contend that the billionaire is not subject to U.S. law.
The SEC asserts that precedent and federal law give the court authority over Zhao and Binance.
The SEC asserted that there is no question as to the Court’s personal jurisdiction over all Defendants.
There is no question that the Court has personal jurisdiction over each and every Defendant, according to the SEC.
Zhao’s ultimate control, according to the SEC, puts investor assets at risk unless prompt action is done, despite claims by Binance’s U.S. subsidiary that it retains control over much of its technological and financial infrastructure.
There can be no guarantee that BAM Trading employees are not still under the influence of Zhao or Binance today, the filing stated, given the history of their open desire to avoid U.S. regulation and oversight, their covert control over BAM Trading, and the mixing and moving of BAM Trading assets through a network of Zhao-controlled entities outside of the United States.
According to federal authorities, Zhao has a “pattern of geographical elusiveness” that makes it challenging to pinpoint his precise address or presence. They are demanding that the court enable them to serve Zhao via emailing his attorneys. Zhao apparently lives in the United Arab Emirates.
