Binance co-founder and CEO Changpeng Zhao has given several interviews discussing the outlook for the cryptocurrency after a tumultuous few weeks in the market.
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The $2.2 billion in US client assets held by Binance are at “significant risk” of being stolen from founder Changpeng Zhao unless a freezing order is put in place, federal regulators said in a statement Tuesday night. after the crypto regulator was indicted by the Securities and Exchange Commission.
SEC lawyers filed an emergency motion earlier, citing risk of capital flight and asking a judge to repatriate and freeze assets of U.S. clients to prevent illegal transfers from Zhao or Binance entities. The SEC sued Binance and Zhao on Monday, alleging that they engaged in an unregistered offering and sale of securities and mixed investment funds with their own.
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The latest declaration described Zhao as “a foreign national who has openly expressed his views that he is not under the jurisdiction of this court”. SEC lawyers alleged that two Binance subsidiaries in the US — BAM Trading and BAM Management — were controlled by Zhao and had already earned “illegal profits” of at least $420.4 million in profits and venture fundraising.
Years of communication between the SEC and Binance, which claims it has no official headquarters, suggested that Binance.US could not clearly indicate who controlled customer assets, according to the filing.
“Zhao and Binance had free reign,” the SEC alleged, over “billions of dollars worth of client assets.”
Zhao’s lawyers say the billionaire is not subject to U.S. law despite his control or beneficial ownership of U.S. companies and bank accounts that sent billions of dollars to holding companies based in Switzerland and the British Virgin Islands, the SEC said.
The SEC says federal law and precedent establish 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 U.S. arm said it maintains control over much of its technology and financial infrastructure, the SEC says Zhao’s ultimate control puts investors’ assets at risk unless immediate action is taken.
“Given the history of Zhao and Binance’s open desire to avoid US regulation and oversight and their covert control of BAM Trading and the commingling and movement of BAM Trading’s assets through a network of entities controlled by Zhao outside the United States, it may there are no guarantees that BAM Trading employees were not influenced by Zhao or Binance today,” the filing said.
Federal regulators are also asking the court to allow them to serve Zhao in an email to his lawyers, saying his “pattern of geographic elusiveness” makes it difficult to identify his exact residence or whereabouts. Zhao is reported to be a resident of the UAE.
Binance did not immediately respond to a request for comment.
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