Binance CEO Changpeng Zhao, popularly known as CZ, has been issued a summons by the U.S. District Court for the District of Columbia. The summons comes in the wake of a lawsuit filed against both CZ and his exchange on Monday, alleging various violations of securities laws and unlawful operations. Here is a breakdown of the key details surrounding the summons and the implications for Binance.
CEO and Exchange Entities Required to Respond
CZ, along with Binance and Binance US, has been instructed to respond to the summons within 21 days. While CZ is not obligated to appear in person, it is crucial for him and the entities to address the allegations made in the lawsuit promptly. Failure to respond may result in a default judgment against them, granting relief as demanded in the complaint.
The Securities and Exchange Commission (SEC), in its 136-page filing against Binance, seeks the disgorgement of ill-gotten gains with prejudgment interest and a permanent injunction prohibiting the firm from engaging in the crypto and securities trading business. The lawsuit alleges that Binance sold unregistered securities in the form of BNB and BUSD and operated as an unregistered securities exchange and broker-dealer within the United States.
Accusations of Fund Commingling and Lack of Independence
Among the allegations leveled against Binance is the accusation of commingling billions of dollars in funds between Binance and Binance US. These funds were allegedly combined within Merit Peak, an entity controlled by CZ. The lawsuit claims that Binance failed to maintain independence from its U.S. counterpart, raising concerns about the transparency and proper handling of funds.
Despite the summons, CZ has maintained a confident stance, viewing it as a procedural aspect of the lawsuit. His response suggests that he remains resolute in his belief that Binance will address the allegations effectively and work towards resolving the legal challenges they currently face.
Separately, the SEC has issued a restraining order to freeze the assets of Binance US pending court approval. This action aims to protect potential investors and prevent further unauthorized activities within the United States. It is important to note that the restraining order does not affect the operations of Binance’s international exchange.