Benzinga - Global cryptocurrency exchange Binance has been accused of having secret access to a bank account belonging to its purportedly independent U.S. partner, Binance.US, and transferring large sums of money to a trading firm managed by Binance CEO Changpeng "CZ" Zhao.
According to banking records and company messages seen by Reuters, more than $400 million flowed from the Binance.US account at Silvergate Bank to the trading firm, Merit Peak Ltd, over the first three months of 2021. Zhao is listed as a Merit Peak manager.
The account was registered under the name of BAM Trading, the U.S. exchange's operating company.
Binance.US executives became concerned by the outflows as the transfers were taking place without their knowledge, according to messages reviewed by Reuters.
The Binance.US CEO at the time, Catherine Coley, wrote to a Binance finance executive in late 2020 asking for an explanation for the transfers, calling them "unexpected" and saying "no one mentioned them."
In a response to Coley, the Binance executive, Susan Li, did not explain the transfers, but wrote Merit Peak was a "vendor that facilitated trading" on Binance.US and also provided loans and capital injections to the American exchange.
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Reuters could not determine the reason for the transfers or whether any of the money belonged to Binance.US customers.
Binance.US spokesperson Kimberly Soward told Reuters in a statement, "Merit Peak is neither trading nor providing any kind of services on the Binance.US platform" and "only Binance.US employees have access" to the bank accounts of the U.S. company. Soward did not specify when Merit Peak's activities ceased.
The money transfers suggest that Binance, which is not licensed to operate in the U.S., controlled the finances of Binance.US, despite maintaining that the American entity is entirely independent and operates as its "U.S. partner." The Department of Justice and the Securities and Exchange Commission are investigating Binance and Binance.US over potential breaches of financial rules, including whether Binance is using the American exchange as a cover for doing business in the US.
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