Co-founder and CEO of Binance, Changpeng Zhao, speaks on stage during the opening night of Web Summit 2022.
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The Securities and Exchange Commission filed an emergency motion in Washington, D.C. federal court Tuesday evening, asking a judge to freeze the assets of Binance's U.S. platform and repatriate both fiat currency and crypto held by the service's customers.
The freezing order only applies Binance's two U.S. holding companies, not to the non-U.S. regulated international exchange. The order would apply to dozens of accounts held at Axos Bank, the defunct Silvergate Bank, Prime Trust, and other institutions.
Two foreign entities also controlled by Zhao, Sigma Chain and Merit Peak, served as conduits for billions of dollars of customer money that was improperly commingled with Binance's funds, the SEC has alleged.
The SEC filed suit against Binance and Zhao on Monday, alleging on thirteen separate counts that the exchange and Zhao had worked to defraud investors, improperly commingle funds, and operate as an unregistered broker, dealer, and clearing house.
The emergency restraining order was necessary, the regulator argued, to "prevent the dissipation of available assets for any judgment, given the Defendants' years of violative conduct, disregard of the laws of the United States."
The order also compels Binance's founder, Changpeng Zhao, to "show cause why a preliminary injunction" against Zhao and his two holding companies "should not be entered." The restraining order would also prevent all three entities from destroying evidence.