Another day, another FUD. This time is different, unfortunately.
Global leading crypto exchange Binance allegedly moved $400 million to a private company linked to Changpeng Zhao, Binance CEO. The shocking news was sourced from the reputable publication Reuters.
Playing it Fast and Loose
According to Reuters, the fund transfer was made secret and Binance’s leadership board was granted access to the bank account of Binance.US at Silvergate despite previous statements asserting separate operations of the two entities.
The case traced back to the beginning of 2021. Reuters said that Binance accessed the bank account of BAM Trading at Silvergate and moved funds to Merit Peak.
BAM Trading is the entity that regulates Binance.US and Merit Peak is a trading firm currently under the SEC’s radar.
The SEC is looking into the connection between Binance and Merit Peak, and the possibilities for illegal activities. Money transfers have been allegedly ongoing by the end of 2020.
Around the same time, the former CEO of Binance.US Catherine Coley said in separate statements, raising concerns on the money transfers, Reuters outlined. Coley left Binance.US in mid-April under curious circumstances.
The news came as the biggest shot against Binance. However, there’s been no concrete evidence of whether the money belongs to the crypto giant or the US customers.
A Backdoor to US Markets?
On the other hand, it shows the financial connection between Binance and Binance.US is closer than what CZ repeatedly asserted in past interviews.
Reuters also added that staff from the US subsidiary revealed Binance sent cryptocurrency to Binance.US, making sales and transferring profits to its bank account.
The article has placed a question of transparency, which CZ has been attempting to prove over a couple of past months. Even worse, many are concerned that Binance.US is close to being investigated.
The similarity was quickly linked to the FTX demise by some in the media, which exposed Sam Bankman-Fried’s secret backdoor to move exchange funds.
Binance recently said a full audit of its balance sheet would be delayed, and its ex-CFO said he had no access to full company accounts for 3 years.
In response to Reuters’ accusation, Binance.US said news of the money transfer was false information, insisting that Meri Peak did not offer any services on Binance.US. CZ has yet to come up with any comment.
The unclear connection between Binance businesses is also a topic of discussion. Binance.US affirmed in a Tweet on Feb.17 that only Binance.US workers are authorized to access their bank accounts.
The exchange did say that it had worked with Merit Peak as a market maker partner in the past, but the partnership terminated in 2021. The firm also said that it would never use customers’ funds for trading purposes.
There has been a string of enforcement proceedings launched by US regulators, led by the Securities and Exchange Commission (SEC), against some of the top crypto and token companies in recent weeks.
Banks offering payments and custody services to these businesses are also under scrutiny. The SEC has been looking into the ties that bind Binance.US to Sigma Chain AG and Merit Peak.
To that end, the SEC has reason to believe that these businesses are conspiring to manipulate prices, generate unfavorable market conditions, and otherwise exploit retail investors.
Binance announced on February 16 that it would be willing to settle with US government agencies through the payment of fines related to ongoing investigations.
Since the beginning of 2022, Reuters has published several articles in which they conduct interviews with former employees of Binance.
The purpose of these interviews is to track the vulnerability in the identity verification (KYC) procedure and investigate whether or not a connection exists between the exchange and Russia following the ongoing conflict in Ukraine.