The recent court documents filed by the Securities and Exchange Commission (SEC) have raised a few eyebrows in the crypto community, as they reveal that billions of dollars of Binance-related funds routinely flowed through Signature Bank and Silvergate Bank for years. It’s worth noting that both banks catered heavily to crypto clients before they shuttered in March, and each bank operated its own round-the-clock payments network, enabling customers to settle digital asset transactions.
The SEC’s review of financial records, which includes bank statements and wire transfers, has found Binance, CEO Changpeng Zhao, and BAM Trading Services—the operator of Binance.US—held numerous accounts at Signature and Silvergate banks. However, Binance maintains that it and Binance.US are separate entities, but the SEC’s lawsuit unveiled on Monday casts doubt on this.
To support its emergency motion seeking to freeze Binance.US’s corporate assets, the SEC’s account of financial records suggests that BAM Trading Services and Binance entities deposited billions of dollars into a single account belonging to Merit Peak, which Zhao is the beneficial owner.
Between 2019 and 2021, Merit Peak’s Silvergate Bank accounts received $22.2 billion in deposits, with $21.9 billion being paid to a foreign affiliate of Paxos, the former issuer of BUSD. The SEC alleges that millions of dollars from Binance-related accounts were commingled in Merit Peak’s accounts.
Furthermore, a company called Sigma Chain, also beneficially owned by Zhao, received funds from Binance and BAM Trading Services. The filing alleges that Sigma Chain “engaged in manipulative trading that artificially inflated […] trading volume” on Binance.US.
The same SEC filing documents that eight Binance-affiliated companies held accounts at Silvergate Bank and Signature Bank with large amounts of money flowing in and out. At the beginning of this year, the SEC found that eight companies owned by Binance and Zhao had a total of $58 million on deposit, while $840 million was deposited into and $899 million withdrawn from those accounts.
By the end of March, the eight accounts were almost empty. The SEC alleges that all of the accounts were either empty or closed by May 27. On Tuesday, the SEC filed an emergency motion, aiming for a temporary restraining order against Binance.US that would freeze the company’s corporate assets and request repatriation of funds, both crypto and cash, to the United States.
While these allegations might seem concerning to some, a Binance spokesperson has expressed disappointment in the SEC’s action and confirmed their readiness to defend themselves in court. The legal outcome between the SEC and Binance will undoubtedly have an impact on the future of regulations concerning crypto institutions and their relationships with banks.
Source: Decrypt
