Global Courant
Binance’s co-founder and CEO Changpeng Zhao has given several interviews discussing the outlook for cryptocurrency after a turbulent few weeks in the market.
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The $2.2 billion in US customer funds held by Binance are at “significant risk” of being stolen by founder Changpeng Zhao unless there is a freezing order, federal regulators said in a filing Tuesday night, after the crypto regulator the Securities was sued. and Exchange Committee.
SEC attorneys previously filed an emergency motion, citing a risk of capital flight and asking a judge to repatriate and freeze US customer assets to prevent unauthorized transfers by Zhao or Binance entities. The SEC on Monday sued Binance and Zhao alleging they engaged in unregistered offerings and sales of securities and mixing investor funds with their own.
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The latest filing describes Zhao as a “foreigner who has openly stated that he is not within the jurisdiction of this Court”. SEC lawyers alleged that two US subsidiaries of Binance – BAM Trading and BAM Management – were controlled by Zhao and had already made “illicit profits” of at least $420.4 million in profits and fundraising.
Years of communication between the SEC and Binance, which claims to have no official headquarters, suggest that Binance.US was unable to clearly identify who controlled client assets, according to the filing.
“Zhao and Binance have had free reign,” the SEC claimed, over “billions of dollars in client assets.”
Zhao’s lawyers say the billionaire is not subject to US law, despite his control or beneficial ownership of US companies and bank accounts that have sent billions of dollars to Swiss and British Virgin Islands holding companies, the SEC said.
The SEC says federal law and precedent determine the court’s jurisdiction over Zhao and Binance.
“There is no doubt that the Court has personal jurisdiction over all defendants,” the SEC said.
While Binance’s US arm has said it retains control of much of its technology and financial infrastructure, the SEC says Zhao’s ultimate control will put investors’ assets at risk unless immediate action is taken.
“Given the history of Zhao and Binance’s overt desire to avoid U.S. regulation and oversight, and their covert control of BAM Trading and the mixing and movement of BAM Trading assets through a web of Zhao-controlled entities outside the United States, there can be no guarantee that BAM Trading employees will not be affected by Zhao or Binance today,” the filing read.
Federal regulators are also asking the court to allow them to serve Zhao by emailing his lawyers because his “pattern of geographic elusiveness” makes it difficult to identify his exact whereabouts or whereabouts. Zhao is reportedly a resident of the UAE.
Binance did not immediately respond to a request for comment.
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