Binance.US asked a federal judge to reject the U.S. Securities and Exchange Commission’s (SEC) request to freeze all of its assets, arguing that the measure would “effectively end” its business.
In a motion filed on June 12, lawyers for the crypto exchange argued that the SEC’s request was a draconian measure that was carefully calibrated to maintain the status quo.
They further argued that an asset freeze would prevent BAM Trading Services — the name of the entity behind Binance.US — from fighting the regulator’s allegations in court and inhibit the firm’s ability to pay its employees, vendors and suppliers, without which operations would quickly grind to a halt.
“With a freeze of all corporate assets, banking partners would most likely cease to honor requests to transfer funds for any purpose, including customer redemptions,” stated the motion.
One banking partner already has been spooked by the SEC’s complaint, said the lawyers, and will cut ties with Binance.US on June 14. The same unnamed banking partner, which holds Binance.US customer assets, said it would be freezing all activity on the firm’s account until the court rules on the SEC’s motion.
The firm has hired former SEC enforcement co-director George Canellos to defend itself against the host of allegations against the firm and its founder Changpeng Zhao, in a lawsuit filed by the regulator last week.
According to former SEC Chief John Reed Stark, the SEC’s emergency asset freeze request coupled with the 76-page enforcement action filed by the U.S. Commodities and Futures Trading Commission (CFTC) earlier this year indicates imminent action from the U.S. Department of Justice.
Stark speculated that the DOJ already has filed under seal a Binance-related criminal indictment.
“My take is that US DOJ is working with the SEC, CFTC and multiple informants/whistleblowers, and the next axe to fall is the filing, or unsealing of, Binance-related criminal charges. Fail not at your peril,” Stark said on Twitter.
Meanwhile, some U.S. lawmakers have condemned the SEC’s recent enforcement actions. On Monday, U.S. Rep. Warren Davidson introduced the “SEC Stabilization Act” into the House of Representatives, a piece of legislation that would restructure the commission and remove Gary Gensler as chair.
“U.S. capital markets must be protected from a tyrannical chairman, including the current one. That’s why I’m introducing legislation to fix the ongoing abuse of power and ensure protection that is in the best interest of the market for years to come. It’s time for real reform and to fire Gary Gensler as chair of the SEC,” he said.