Binance U.S. clients have $2.2 billion ‘at high risk’ after the crypto exchange was penalized

Binance $2.2 billion in U.S. client funds are at “significant risk” of being stolen by founder Changpeng Zhao unless an injunction to freeze them is issued. The federal authorities claimed that in a filing Tuesday night, after the crypto regulator’s accusation by the Securities and Exchange Commission.

The SEC’s lawyers had previously filed an emergency motion, citing a danger of capital flight and requesting that a court repatriate and freeze U.S. customer funds to prevent illegal transfers by Zhao or Binance businesses. On Monday, the SEC filed a lawsuit against Binance and Zhao, saying that they participated in the unregistered offer and sale of securities and mixed investor money with their own.

Zhao was described in the most recent filing as a “foreign national who has made overt his views that he is not subject to the jurisdiction of this Court.” SEC attorneys said that Zhao owned two Binance U.S. firms, BAM Trading and BAM Management, and that they had previously made “illicit gains” of at least $420.4 million in earnings and venture capital.

Years of interactions between the SEC & Binance, claiming no official headquarters, show that Binance.US was unable to clearly indicate who controlled customer assets, according to the filing.

Zhao and Binance have had free reign,” the SEC said, over “customer assets worth billions of dollars.

According to Zhao’s attorneys, despite his control over or beneficial ownership of U.S. firms and bank accounts that transported billions of dollars to Swiss and British Virgin Islands-based holding companies, the billionaire is not subject to US law.

Also read: Binance chooses to stop US bank dollar transfers as of February 8th

According to the SEC, the court has jurisdiction over Zhao and Binance based on federal law and precedent.

There is no doubt that the Court has personal jurisdiction over all Defendants,” according to the SEC.

While Binance’s US subsidiary has said that it retains authority over much of its technical and financial infrastructure, the SEC claims Zhao’s ultimate control puts investor money at danger unless fast action is done.

Given the history of Zhao’s and Binance’s open desire to avoid U.S. regulation and oversight, and their surreptitious control over BAM Trading, as well as the commingling of and movements of BAM Trading assets through a web of Zhao-controlled entities outside of the United States, there can be no assurance that BAM Trading employees are not influenced by Zhao or Binance today,” the filing said.

Federal authorities have also asked the court to allow them to serve Zhao via emailing his attorneys, claiming that his “pattern of geographical elusiveness” makes determining his actual address or whereabouts problematic. Zhao is said to be a UAE resident.

Binance did not reply to a request for comment right away.