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Binance founder Zhao Changpeng: Cash outflows caused unrest
Photo: BENOIT TESSIER / REUTERS
The world's largest crypto exchange Binance apparently has direct access to a bank account of its supposedly independent US partner Binance.US.
Binance is said to have used this access to gradually move more than $400 million to a trading company controlled by Binance founder and CEO Changpeng Zhao.
This is according to bank records and company news from the crypto exchange, according to Reuters.
The money transfers may indicate that Binance global exchange, which is not licensed to operate in the US, controlled the finances of its American entity.
As a result, the U.S. Department of Justice and the U.S. Securities and Exchange Commission (SEC) have asked the crypto exchange for information about their relationship as part of ongoing investigations into possible violations of financial regulations.
Authorities intend to find out whether Binance is using the American exchange as a cover for doing business in the United States.
Binance.US boss called the transfers "unexpected"
The $400 million reportedly flowed from California-based Silvergate Bank to trading firm Merit Peat, which is chaired by Binance CEO Changpeng Zhao, during the first three months of 2021, Reuters learned after reviewing quarterly records .
It is unclear whether the money was from Binance.US customers.
The terms and conditions at the time stated that their dollar deposits were held by Silvergate Bank and a custodian in Nevada.
Binance.US was concerned about the outflow of funds, according to news seen by Reuters.
The then head of Binance.US asked Binance directly for an explanation because the transfers were “unexpected” and “no one mentioned them”.
Binance CFO, on the other hand, recently stated that the relationship with Binance.US consists only of a shared name and a technology license agreement.
"We don't transfer our deposits back and forth," she told the Wall Street Journal.
Binance spokeswoman Kimberly Soward did not address questions about the transfers detailed in the bank's records.
In a statement, she only said Reuters was using outdated information.
She added, "Merit Peak does not trade or provide services on the Binance.US platform."
According to Soward, only Binance.US employees have access to the US company's bank accounts.
Reuters has not been able to find out what became of the $400 million.
But an unspecified portion of the money was later transferred to the Silvergate account of a Seychelles-based company called Key Vision Development Limited, according to a person familiar with the matter with direct knowledge of the transfers.
The director of Key Vision is Zhao Changpeng.
pbe/Reuters