In response to the U.S. Securities and Exchange Commission’s (SEC) request for an emergency temporary restraining order (TRO), which would allow the regulator to freeze assets tied to Binance.US, Binance questioned how the situation could constitute an “emergency” when the company has been operating for years, and the SEC is not alleging that user funds are at risk.
“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's court filing states.
According to a press release, on June 6, the SEC “filed an emergency action application seeking a temporary restraining order freezing assets, directing defendants to repatriate assets held for the benefit of customers of the Binance. US crypto trading platform, and seeking other emergency relief against Binance Holdings Limited, BAM Trading Services Inc., BAM Management US Holdings Inc., 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.”
Binance’s court filing states that the SEC’s TRO request fails to answer the question “why now?” The filing calls the SEC’s request “unwarranted and improper,” noting that the SEC “must carry the burden of establishing a right to the relief it requests.” According to the filing, the SEC has not provided evidence to support the necessity of a TRO, instead providing only “unfounded and subjective worries of its staff.”
“The SEC does not and cannot point to anything that would justify such dramatic action which does little more than risk panic selling and destabilization of the cryptocurrency markets,” the filing states.
Binance’s filing emphasizes that the TRO is “untethered” to the allegations the SEC has put forth against the company. “The SEC’s brief does not identify a single instance in which BAM customer assets were mishandled or misused,” the filing states.
The court filing questions the legitimacy of the SEC’s accusations of registration violations, given 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.” The filing noted that the “complex question” of whether digital assets should be classified as securities “is the subject of intense debate and extensive legal proceedings across the nation” and therefore should “be considered on a full record, not on a purportedly emergency basis over a matter of just a few days.”
The filing asserted that the SEC’s “TRO should thus be denied in its entirety,” but said that if the court feels that it should grant some of the SEC’s requested relief, Binance is prepared to enter into a proposed consent order, under which BAM would agree to not transfer any assets to Binance Holdings Limited (BHL) or any entities affiliated with it or with Binance’s CEO. BAM would also verify that no U.S. customer assets are controlled by devices located outside of the U.S.
“These are significant concessions by Defendants and should allay any ‘concern’ raised by the SEC that BAM customer assets are purportedly not safe,” the filing states. “Simply put, the Proposed Consent Order obviates the need for any nonconsensual emergency relief requested by the SEC.”