- The SEC has taken its crypto enforcement effort up a notch.
- As part of its enforcement action against Binance, the SEC has sought to restrict Binance’s access to Binance.US funds.
- The court recently granted this request.
This week the United States Securities and Exchange Commission sent shockwaves through the crypto industry by launching an enforcement action against the world’s largest crypto exchange, Binance.
Among other complaints, the SEC alleged that Binance and its Chief Executive Officer Changpeng “CZ” Zhao maintained significant control over Binance.US, despite public statements from the company to the contrary. According to the regulator, this oversight included access to Binance.US customer deposits.
The SEC notably urged the court to freeze assets tied to Binance.US-related entities. The court has granted this request per a recent filing.
The Court Order
In a filing dated Tuesday, June 6, the United States District Court for the District of Columbia revealed that it had granted the SEC’s request for a temporary restraining order on BAM Management and BAM Trading.
In its order, the court asserted that the SEC had given enough evidence to suggest that “the Defendants have engaged in and, unless temporarily restrained and enjoined by order of this Court, will continue to engage in acts, practices, and courses of business” that violate U.S. securities laws.
What Does It Mean?
The order effectively freezes the assets of BAM Management and BAM Trading, preventing the firms from sending out Binance.US customer funds except to custodians like BitGo or Aegis. In addition, it forces the repatriation of any assets held on behalf of Binance.US customers.
The court notably supported the SEC’s arguments that such an order was necessary to prevent the movement of funds outside its jurisdiction. The court also noted that ordering Binance to place any funds held on behalf of Binance.US customers in Binance.US custody was necessary to ensure the safety of these deposits.
Following the order, Binance has only five days to ensure that access to customer funds is restricted to Binance.US and 30 days to transfer any assets that it holds on behalf of Binance.US customers.
Should You Worry?
It is worth noting that the order only affects the transfer of customer deposits to Binance-related entities enjoined in the lawsuit and does not affect customer withdrawals.
"BAM Trading may continue to transfer Customer Assets to support redemptions of Customer Crypto Assets, with the exception of and specifically excluding Customer Crypto Assets of any of the Binance Entities and otherwise subject to the prohibition that it not transfer Customer Assets for the benefit of any of the Binance Entities," the court wrote.In a Twitter statement on Tuesday, June 6, Binance.US assured customers that it continued functioning as usual.
“User assets remain safe and secure and the platform continues to be fully operational with deposits and withdrawals functioning as normal,” the crypto exchange wrote.
Binance.US has seen over $16.2 million in outflows in the last 24 hours, per data from DeFi Llama. In a tweet on Wednesday, June 7, Bitcoin analyst Willy Woo sharing Glassnode data, also suggested that the news has had little impact on the parent exchange.
On the Flipside
- FTX also assured users that customer deposits were safe before the crypto exchange collapsed.
- The SEC has launched enforcement action against Coinbase.
- There is speculation that the SEC case against Binance is a prelude to criminal charges from the U.S. Department of Justice.
Why This Matters
The U.S. court decision to freeze assets of Binance.US affiliated entities brings the SEC crypto enforcement campaign into uncharted territory and raises further concern about the crypto exchange’s operations.
Read this to learn more about the SEC case against Binance:
Binance Sued: How SEC Lawsuit Differs from CFTC Case
Learn about the SEC’s objections to Coinbase’s business model:
