In a recent filing from the U.S. Securities and Exchange Commission (SEC), it was revealed that Binance allegedly moved billions of dollars in customer funds through Signature Bank and Silvergate Bank, both crypto-friendly U.S. firms that faced failure in March. SEC accountant Sachin Verma indicated that entities controlled by Binance’s CEO, Changpeng Zhao (CZ), held numerous accounts within both banks, including one with Merit Peak Limited.
According to Verma, between 2019 and 2021, Merit Peak accounts received $22 billion, while $21.6 billion was paid to Paxos Trust Company, issuer of Binance’s BUSD stablecoin. The accounts maintained relatively lower balances at the beginning and end of the month, often experiencing large incoming credits followed by outgoing debits. These claims parallel a Reuters report last month alleging that Binance mixed client funds with corporate funds between 2020 and 2021.
Binance contested the allegations, claiming that no “client funds” or “dollar deposits” were mixed, as any purported mixing solely involved the conversion of USD into BUSD tokens within customers’ accounts. Furthermore, the accountant tracked $494 million transferred to the Zhao-owned blockchain R&D firm Sigma Chain from Binance-related entities. These funds were eventually dispersed to several Binance-connected companies, including $32 million to Guangying Chen, a Zhao associate and Chinese national with early ties to Binance.
The filing also disclosed that Guanying was a listed signatory for many other Zhao-owned foreign companies, many with Binance in their name. One of these company accounts, Bitfinity UAB, transferred $47 million through a series of Binance account transfers to a Guanying-controlled company account between 2020 and 2022.
A Binance spokesperson denied the transactions reported in the filing involved any customer funds. However, Louise Shelley, a George Mason University professor and money laundering specialist, remarked that Binance’s transfers were “one of the more sizable cases” of financial misconduct she has encountered. Shelley added that the case is “just so mammoth and should be raising red flags.”
While the filing indicates potentially concerning activities, Binance’s defense that the funds in question are related to the conversion of USD to BUSD within customers’ accounts adds a different perspective to the matter. As the debate unfolds, it remains crucial to examine the evidence from both sides while considering possible implications for the broader crypto industry and its regulatory future.
Source: Cryptonews
