SEC Alleges Binance and Its US Affiliate Diverted Billions in Customer Assets to Zhao’s Funds
SEC Alleges Binance and Binance.US Diverted Over $12 Billion in Customer Assets to Entities Controlled by Changpeng ‘CZ’ Zhao
In a recent development, the Securities and Exchange Commission (SEC) has leveled accusations against Binance and its US affiliate, Binance.US, claiming that between 2019 and 2021, they redirected more than $12 billion in customer assets to entities under the control of Binance’s founder and owner, Changpeng ‘CZ’ Zhao.
These new allegations from the SEC have emerged as additional supporting evidence in the agency’s request to a federal judge, seeking a temporary freeze on assets held by Binance.US, extending beyond the scope of customer redemptions.
While the SEC aims to freeze both Binance and Zhao’s assets, currently, they have only filed a temporary restraining order on the assets of Binance.US.
Binance and Binance.US Decline to Comment on SEC Allegations
Binance and Binance.US spokespersons have chosen not to provide immediate comments regarding the recent allegations made by the Securities and Exchange Commission (SEC). The SEC’s accusations were revealed in a court document filed late on Tuesday, which stated that the agency utilized banking information to establish connections between entities.
The analysis of accounts held by Binance, Binance.US, and Changpeng ‘CZ’ Zhao at Silvergate and Signature Banks led the SEC to assert that over $12 billion of customer assets were redirected, with a significant portion flowing into an entity called Merit Peak.
The SEC further claimed that most of Merit Peak’s funds were transferred to a foreign affiliate of Paxos, a New York-based trust company that had previously partnered with Binance on the BUSD stablecoin. Paxos, while distancing itself from Binance, expressed its commitment to cooperating with governmental efforts to bring wrongdoers to justice.
The SEC’s filings also revealed more details about Binance’s operations and the ongoing investigation into Binance.US, which predates the current SEC Chair’s tenure. Binance.US had allegedly obstructed the SEC’s requests for information, and the SEC raised concerns over the custody of assets held by Binance.US.
These developments bear resemblance to similar accusations leveled against Sam Bankman-Fried, the founder of FTX, who faces criminal charges for redirecting customer funds to address losses at Alameda Research.
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