Binance Exposed For Allegedly Controlling U.S. Affiliate’s Bank Accounts

Binance’s alleged control over its US affiliate’s finances has come under the spotlight again following the revelation that a senior executive, Guangying Chen, was the main operator of five bank accounts belonging to Binance.US, including one that held American customers’ funds. 

According to a Reuters report, Silvergate Bank authorized Chen to operate these accounts in 2019 and 2020, according to bank records, giving her team exclusive control over the funds. Binance.US has denied that its parent company controlled its bank accounts, but the newly disclosed bank records and messages suggest otherwise.

Secret Access To U.S. Affiliate’s Bank?

According to Reuters, the latest findings suggest that the company exercised “tight control” over Binance.US’s finances, despite both companies insisting that they operated independently. The bank records and messages show that the exchange’s management over the U.S. business’s finances extended across its bank accounts at Silvergate and detail how this secret access was granted.

Binance.US’s head of legal, Krishna Juvvadi, told Reuters in April that employees of Binance.US’s operator, BAM Trading, had “exclusive control” over the bank accounts since its founding in 2019. However, in response to questions for this article, a Binance.US spokesperson said that no one other than Binance.US officials had control or access to the accounts since the company’s current CEO took over in late 2021.

Furthermore, earlier this year, Reuters reported that a deputy of Chen’s had access to one Binance.US Silvergate account, which transferred more than $400 million in 2021 to a trading firm controlled by Zhao. Binance.US denied any wrongdoing and said the trading firm was withdrawing its funds. However, Reuters reported on May 23 that Binance commingled its customers’ funds with its corporate revenues, in breach of U.S. financial rules that require client money to be kept separate.

Binance Legal Woes Deepen

The U.S. operations of one of the world’s largest cryptocurrency exchanges have been under increased scrutiny by regulators. In March, the Commodity Futures Trading Commission (CFTC) charged the exchange and its CEO, Changpeng Zhao, with willful evasion of commodities laws. Furthermore, the CFTC accused the exchange of “intentionally structuring entities” to avoid U.S. regulations designed to protect investors. Zhao called the charges an “incomplete recitation of facts.” 

In light of these irregularities spotted by the US regulators, the Securities and Exchange Commission (SEC) has filed a sweeping case against Binance, accusing it of mishandling customer funds and lying to regulators and investors about its operations, as reported by Bitcoinist. 

The charges include secretly mixing “billions of dollars” in customer funds and sending them to a separate company controlled by Changpeng Zhao and misleading investors about the adequacy of its systems to detect and control manipulative trading.

The recent SEC complaint against the exchange has significantly impacted the cryptocurrency market, with most top cryptocurrencies experiencing a sharp decline in value. BNB is a prime example of this trend, as its value has dropped by 8% in just a few hours of trading, falling from over $300 to $279.

Featured image from Unsplash, chart from TradingView.com