Binance, one of the world’s largest cryptocurrency exchanges, is accused of controlling the finances of its US affiliate, Binance.US. Guangying Chen, a senior executive, allegedly operated five bank accounts belonging to Binance.US — including one holding funds from American customers.
Bank records reportedly show Silvergate Bank authorized Chen to operate the accounts, giving Binance.US’s team exclusive control over the funds. However, Binance.US denies that its parent company controlled its bank accounts, despite newly disclosed bank records and messages suggesting otherwise.
Binance.US Finances Under Tight Control?
The latest revelations suggest that Binance exercises “tight control” over Binance.US finances. Although both companies claim to operate independently, bank records and messages indicate that Binance’s management extended its control over Binance.US’s bank accounts at Silvergate Bank.
Binance.US’s Chief Legal Officer, Krishna Juvvadi, had previously stated that BAM Trading employees had “exclusive control” over the accounts. However, a spokesperson for Binance.US has since said that no one other than Binance.US officials had access to or controlled the accounts since late 2021.
In May, Reuters reported that a deputy of Chen’s had access to a Binance.US Silvergate account, which transferred more than $400 million in 2021 to a trading firm controlled by Changpeng Zhao, Binance’s CEO. Binance.US denied any wrongdoing and said the trading firm was withdrawing its funds. However, Reuters reported on May 23 that Binance mishandled customers’ funds by commingling them with its corporate revenues, in breach of U.S. financial rules that require client money to be kept separate.
Legal Woes for Binance
The US operations of Binance have faced increased scrutiny from regulators. In March, the Commodity Futures Trading Commission (CFTC) charged the exchange and Changpeng Zhao with willful evasion of commodities laws, accusing it of “intentionally structuring entities” to avoid U.S. regulations designed to protect investors. Zhao called the charges an “incomplete recitation of facts.”
The Securities and Exchange Commission (SEC) has also filed a lawsuit against Binance, accusing it of mishandling customer funds and lying to regulators and investors about its operations, as reported by Bitrabo. The lawsuit alleges that Binance secretly mixed “billions of dollars” in customer funds and sent them to a separate company controlled by Zhao, as well as misled investors about the adequacy of its systems to detect and control manipulative trading.
These issues have had a significant impact on the cryptocurrency market, with most top cryptocurrencies, including Binance’s BNB, experiencing a sharp decline in value.
Featured image from Unsplash, chart from TradingView.com
