The $2.2 billion of U.S. customer assets held by Binance are at “significant risk” of being stolen by founder Changpeng Zhao unless a freezing order is put in place, federal regulators said in a filing Tuesday night, following the Securities and Exchange Commission’s charge against Binance. SEC lawyers filed an emergency motion earlier, citing a risk of capital flight. They asked a judge to repatriate and freeze U.S. customer assets to prevent illicit transfers by Zhao or Binance entities. On Monday, the SEC sued Binance and Zhao, alleging they engaged in the unregistered offer and sale of securities and commingled investor funds with their own.
The latest filing described Zhao as a “foreign national who has made overt views that he is not subject to the jurisdiction of this Court.” SEC lawyers alleged that two Binance U.S. subsidiaries — BAM Trading and BAM Management — were controlled by Zhao and had already garnered “illicit gains” of at least $420.4 million in profits and venture fundraising. According to the filing, years of communications between the SEC and Binance, which claims no official headquarters, suggest that Binance.US couldn’t clearly indicate who controlled customer assets. “Zhao and Binance have had free rein,” the SEC alleged, over “customer assets worth billions of dollars.” According to Zhao’s attorneys, the billionaire is not subject to U.S. law, even though he owns U.S. companies and bank accounts that transfer billions of dollars to Swiss and British Virgin Islands-based holding companies, the SEC said. The SEC says federal law and precedent establish the court’s jurisdiction over Zhao and Binance.