- SEC to freeze Binance funds pending proof no one at the exchange can access them
- Binance.US sold "unregistered securities" in the form of BUSD and Binance Coin
- The Republicans' SEC Stabilization Act has the main provision to remove Gary Gensler
Binance.US, the US arm of the global cryptocurrency exchange, has argued that the Securities and Exchange Commission’s (SEC) effort to freeze its funds is "draconian and unduly burdensome." They claim the regulator is seeking “unnecessary and unjustified relief.” Instead of requesting relief that is balanced to maintain the status quo, the proposed measures “would effectively end BAM’s business,"the motion of Binance.US argued.
SEC demands full asset freeze
The entity behind the exchange’s US arm is BAM Trading Services. The SECasked to freeze its funds until it could provide evidence that no one at the exchange could access them, including majority owner and Binance CEO CZ.
On June 5, the SEC filed a lawsuit against Binance and its CEO for allegedly violating several federal securities laws. The watchdog claimed Binance.US sold unregistered securities in the form of the stablecoin BUSD and Binance Coin (BNB). The regulator also accused the exchange that its staking service violated securities laws.
Other accusations include failing to register as a clearing agency, an exchange, and a broker. The watchdog also claims CZ controlled Binance.US behind the scenes and that an entity he owned was inflating the US arm’s trading volume.
Binance’s alternative proposal
Binance has asked the court to approve an alternative, under which Binance would transfer all assets to BAM Trading's control and custody, ensure that only the staff of the US arm have access to them, which would exclude CZ, and guarantee that no one from Binance Global had access. The funds would be transferred to new wallets within two weeks.
The alternative proposal would let Binance.US keep paying staff and vendors, but not any other Binance affiliate.
No proof BNB was sold as an investment contract
According to Binance’s filing, SEC provided no proof BNB was sold as an investment contract, although the regulator didn’t point to any other asset on the Binance.US platform as an unregistered security. Binance also quoted SEC Chair Gary Gensler, who told Congress in 2021 that there was no legislative framework for cryptocurrencies:
Right now, exchanges trading in crypto assets do not have a regulatory framework either at the SEC, or our sister agency, the Commodity Futures Trading Commission, that could instill greater confidence. Right now, there is not a market regulator around these crypto exchanges, and, thus, there is really not a protection against fraud or manipulation.
Republicans introduce bill to remove Gensler
Warren Davidson, US representative for Ohiofrom the Republican Party, introduced the “SEC Stabilization Act” in Congress, which has the main provision to remove Gary Gensler. Davidson was quoted by Cointelegraph as saying:
US 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.
Fox News reported that if the bill is passed into law, Gensler will leave office and the power will be redistributed between the new chair of the regulator and its commissioners. The bill also proposes to create an executive director position, stop any entity from holding a majority on SEC, and add a sixth commissioner.
Davidson is a known proponent of crypto although he did not explicitly mention it in his statement.
CZ: No need for emergency action
Binance Global and its CEO insisted customer funds weren’t at risk in a joint memorandum in support of the US arm's filing, adding no emergency measures were needed. The memorandum claims that SEC allowed the exchange to operate in the US for years without introducing any kind of enforcement action.
Contributors
