Binance CEO’s Trading Company Received $11 Billion Through Custody Company, SEC Says

By Tom Wilson

LONDON (Reuters) – Merit Peak, an offshore trading firm controlled by Binance CEO Changpeng Zhao, has received around $11 billion in client assets through a Seychelles-based company set up to receive the customer deposits, according to a U.S. Securities and Exchange Commission filing.

The SEC filing, which on Tuesday asked a US court to freeze Binance’s US assets, came a day after the SEC sued Binance, its billionaire CEO Zhao and the operator of its US affiliate exchange, for allegedly operated a “deception network”.

In its 13 charges, the SEC alleged that Binance and Zhao used Merit Peak and Sigma Chain, another trading firm controlled by Zhao, to mix company funds with client assets and use the money “to their own way”. This put clients’ assets at risk as Binance sought to “maximize” profits, the SEC wrote in its civil complaint on Monday.

In response to the SEC lawsuit, Binance said it would vigorously defend its platform. “All user assets on Binance and Binance’s affiliate platforms, including Binance.US, are safe and secure,” it said in a statement Monday.

Funds received by British Virgin Islands-based Merit Peak between 2019 and 2021 came from Key Vision Development Ltd, also controlled by Zhao, the SEC filing showed on Tuesday.

The $11 billion sent by Key Vision to Merit Peak is part of $22 billion in assets — mostly owned by Binance and its U.S. subsidiary — that Merit Peak received between 2019 and 2021, according to the SEC filing on Tuesday. .

Binance did not respond to email questions from Reuters on the matter, and a spokesperson did not respond to a voicemail.

Reuters reported last month that Key Vision and Merit Peak, along with the Cayman Islands holding company of Binance, formed the core of the global crypto exchange’s financial network.

In response to this post, Binance denied mixing customer deposits and company funds, saying users sending money were not making deposits but rather buying the bespoke dollar-linked crypto token from Binance.

The SEC said in its lawsuit that Merit Peak, who describes herself as trading with Zhao’s “self-made wealth,” operated on both the Binance.com and Binance.US platforms.

The SEC said in the filing on Tuesday that it could not determine why an entity “allegedly trading” on Binance.US with Zhao’s personal funds “acted as a ‘transitory’ account for billions of dollars in corporate funds. Binance Platforms customers”.

Between 2019 and 2023, Sigma Chain’s U.S. bank accounts received nearly $500 million, mostly from Binance and BAM Trading, including $15 million from Key Vision, according to the SEC filing on Tuesday.

FX SON

Tuesday’s SEC filing gave further examples of how Binance and Zhao, one of crypto’s most prominent figures, allegedly moved “billions of dollars” across the United States.

Some accounts belonging to Zhao have sent funds “overseas” in recent months, the SEC wrote in the filing.

Through 2022, a U.S. account for a company called Swipewallet, of which Zhao is the beneficial owner, sent $1.5 billion in foreign exchange transfers, the SEC said in the filing without giving further details. . The SEC said that in such processes, dollars are converted into a foreign currency before being transmitted to a beneficiary.

Binance acquired Swipe, a digital wallet and debit card platform, in 2020. There have been no public posts on Swipe’s social media accounts since early last year. Swipe did not respond to a request for comment.

In some of the most detailed examples of fund transfers by Binance and Zhao, the SEC filing on Tuesday alleged that as of January 1 this year, $840 million had been deposited at eight companies owned by Binance and Zhao, with $899 million dollars withdrawn from these accounts. “during this same period.” By the end of March, all but one of the accounts had a zero balance, the SEC said.

The SEC filing also indicates that between January and March of this year, several Binance bank accounts then transferred more than $162 million overseas to an overseas account belonging to a Singaporean company beneficially owned by the official. from the back office of Binance, Guangying Chen, a close associate of Zhao.

Binance did not respond to requests for comment on these alleged transfers.

Some $32 million was also sent from Sigma Chain to Chen, the SEC said, without giving further details. Chen did not respond to requests for comment from Reuters.

(Reporting by Tom Wilson. Editing by Jane Merriman)

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