The echoes of the SEC’s lawsuit against Binance continue in the crypto markets. Among the SEC’s 13 complaints, there are accusations such as Zhao’s control of the operations of Binance.US, which should be independent, the company’s customer and corporate funds, and artificially inflating transaction volumes.
Crypto markets experienced sharp declines after the Securities and Exchange Commission (SEC) filed a lawsuit against Binance, the world’s largest crypto exchange platforms, customer funds, binance us,
According to the SEC’s complaint, Binance transferred customer funds to institutional accounts managed by Binance CEO Changpeng Zhao. The allegation is considered one of the most significant among 13 complaints filed by the SEC and the U.S. Commodity Futures Trading Commission (CFTC).
The SEC said Binance.US, which operates in the US, should have been set up to operate independently under the supervision of US regulators, but the reports suggest that Guangyin Chen, a senior Binance executive and one of Zhao’s close associates, was contacted by US bank Silvergate Bank. He stated that it showed that he was authorized to operate five Binance.US bank accounts, including the account where customer funds were kept, in 2019 and 2020.
“Binance.US did not have control over its finances until 2021”
The organization claims that the elaborate scheme implemented by Binance and its founder, which resulted in Binance.US having no control over its own finances until at least 2021, was a “network of deception” and aimed at evading US regulations.
Accordingly, Binance sent billions of dollars worth of customer funds to accounts controlled by Merit Peak Limited, a separate company controlled by the company’s founder, Changpeng Zhao. However, the SEC alleged that Zhao and Binance transferred customer funds at will and that large-scale money transfers were made to Sigma Chain, a Switzerland-based trading firm.
According to SEC reports, Merit Peak and Sigma Chain companies were used by Zhao to transfer tens of billions of dollars from Binance, Binance.US and other organizations. According to the SEC, $145 million was transferred from Binance.US to Sigma Chain in 2021 alone. On the other hand, records show that $11 million from Sigma Chain accounts was used to purchase a yacht.
The foundations of the Binance investigation are based on transactions made in 2019. Binance.US was founded by BAM Trading company, whose CEO at the time was Catherine Coley. However, the SEC claims that BAM Trading belongs to Zhao through offshore companies.
The organization claims that Binance.US was supposed to operate as Binance’s sole US partner, but Zhao used Binance.US as a subsidiary to avoid US regulatory oversight.
Messaging records show Silvergate requested a signed banking authorization order from Coley, handing control of Binance.US finances to Chen. The decision authorizes Chen to open accounts, conduct transactions and other operational activities on behalf of BAM Trading.
According to SEC reports, Chen later signed another agreement with Silvergate, making him a “Primary Administrative User” and granting him powers that allowed him to withdraw and deposit money from 5 bank accounts.
Among these five bank accounts, there is also a corporate customer account that transfers money to Merit Peak. As a result, the SEC filed several lawsuits against Binance and its founder, alleging that the company diverted customer funds for corporate purposes.
Other key allegations in the SEC’s lawsuit include Binance artificially inflating trading volumes, failing to restrict U.S. customers from its platform, and misleading investors about its market surveillance control.
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