SEC Moves To Freeze Binance Held Assets—How it Affects You

As part of its enforcement action against Binance, the SEC has sought to restrict Binance’s access to Binance.US funds.

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Created by Kornelija Poderskytė from DailyCoin
Erratum: The following article was corrected on 2023/13/6
It was reported that the court had granted the SEC's request to freeze Binance.US assets.
The article has now been amended to clarify that the court has yet to rule on the SEC's request.
  • 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 move raises questions about its implications.

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 has notably urged the court to freeze assets tied to Binance.US-related entities.

The SEC Goes After Binance.US Assets

In a filing dated Tuesday, June 6, the SEC asked the United States District Court for the District of Columbia for a temporary restraining order on BAM Management and BAM Trading assets.

In its request, the SEC asserts that it has 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 Happens if the SEC Succeeds?

The order, if given, 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 will force the repatriation of any assets held on behalf of Binance.US customers.

According to the SEC, such an order is necessary to prevent the movement of funds outside the court’s jurisdiction. The commission also argued 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.

Should the court approve, Binance will have 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 scope of the request only covers 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 SEC wrote.

In a Twitter statement on Tuesday, June 6, Binance.US assured customers that it continued to function 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 request 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:

SEC Condemns Coinbase Operating Structure in Lawsuit Spree

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Okoya David

David Okoya is a crypto news reporter at DailyCoin based in Nigeria. He covers various topics related to the cryptocurrency industry, including exchanges, regulations, and price movements, and strives to bring fresh angles to breaking news. With experience as a freelance crypto news writer, David upholds the highest journalistic standards, telling complete stories and answering lingering questions whenever possible.