The U.S. Securities and Exchange Commission (SEC) is seeking an emergency temporary restraining order (TRO) against Binance, the largest cryptocurrency exchange in the world, which would allow the regulator to freeze assets tied to Binance.US.
The SEC announced June 6 that as well as freezing assets, the TRO would direct defendants to repatriate assets held "for the benefit" of Binance.US customers. The TRO is also "seeking other emergency relief" against BAM Management US Holdings Inc., BAM Trading Services Inc., Binance Holdings Limited and their founder Changpeng Zhao "to ensure that Binance.US customers’ assets are protected and remain in the United States through the resolution of the SEC’s pending litigation of this matter," the release states.
In response, Binance has filed a memo challenging the SEC's "emergency" claim, calling it "manufactured" for the SEC's "purposes” of gaining a legal advantage unsupported by fact.
“The SEC’s request for a temporary restraining order should be denied for several reasons, but the most important is this: there is no risk to BAM’s customer assets. Indeed, there is no ‘emergency’ here at all, other than the one manufactured by the SEC for its own purposes,” Binance said.
In a court filing, Binance said there are three main reasons the court should reject the SEC’s emergency TRO request. The first reason, Binance said, is that the SEC’s requested relief is “unwarranted and improper,” noting that the SEC “must carry the burden of establishing a right to the relief it requests,” which the filing said the SEC has not done.
Secondly, the SEC’s request to freeze user assets is “untethered” to the SEC’s complaints against the company, which are alleged registration violations, Binance argues. “The SEC’s brief does not identify a single instance in which BAM customer assets were mishandled or misused,” the filing states.
Finally, Binance states that the “SEC has failed to show the requisite likelihood of success as to the registration claims.” The filing states that the regulator “does not have authority to require registration when it has not answered the threshold question of what cryptocurrency assets, if any, constitute securities under federal securities laws.”
Binance highlighted the timing of the SEC’s request, asking, “[H]ow is it that the sudden ‘emergency’ happens to coincide with the SEC’s assault on the crypto industry as a whole, with Binance and Coinbase being sued on back-to-back days? This particular investigation has been going on for years and until May 30, 2023, the SEC never suggested to Defendants Binance Holdings Limited (“BHL”) or Changpeng Zhao that there was even a theoretical risk to BAM’s customer assets.”
The court filing emphasized that there is no answer to the question of “why now?” in the SEC’s request other than the SEC’s “desire to obtain litigation advantage” against Binance and other crypto industry participants, the filing states.
