Binance

Binance: Beleaguered exchange finds itself under closer scrutiny in the US, this time with the SEC

Binance: Embattled exchange finds itself under more scrutiny in US—this time with SEC

The U.S. Securities and Exchange Commission (SEC) has opened an investigation into Binance.US over its relationship with two trading firms believed to trade against Binance.US customers, according to a report by the Wall Street Journal.

The two companies, Sigma Chain AG and Merit Peak Ltd, are market makers controlled by Binance Founder and CEO Changpeng Zhao in 2021. Part of the investigation would focus on whether Binance.US disclosed its relationship with companies. , both of which trade with Binance.US clients. The United States securities regime prohibits making money as a result of deception and/or omission of material facts in dealings with clients.

The allegations are said to be in line with Binance’s well-documented practice of hiding its corporate structure from regulators and flouting legal requirements. If it is true that these companies were affiliated with Binance and traded on Binance platforms, it would appear that Binance committed a material violation of securities law disclosure rules, to say the least.

It turns out that Sigma Chain AG and Merit Peak Ltd are both so closely tied to Binance that they could rightfully be considered its subsidiaries – a fact that Binance has gone to great lengths to conceal.

Sigma Chain AG is a company registered in Switzerland. Public records of when the company was incorporated, appoint Changpeng Zhao as the founding chairman; the only other member of the society from this period is Pascal Schmid, former member of the Cardano Foundation. Zhao assumed the position in September 2019. At that time, control was handed over to a man named Guangying Chen, who is still listed as the company’s director today. Schmid was replaced by Binance listed board member Markus Felix Spillman on July 14, 2021.

The former management of Sigma Chain AG (The source)
Current management of Sigma Chain AG
The current management of Sigma Chain AG (The source)

Guangying Chen is something of an enigma, but the name pops up time and time again in connection with Binance and Zhao. She appeared on a leaked list from 2017 believed to be a list of digital asset companies that were then under investigation by Chinese authorities. The list, curated by independent investigative journalist LibreHash, contains an entry for Binance and lists the rep as—you guessed it—Guanying Chen. Guangying’s name also appears on the historical whois lookups for Binance domainsincluding Binance.com, discovered by scambinance.com.

There is no publicly available information on the other company, Merit Peak Ltd. A company with this name seems to have been at one time a storage company registered in the British Virgin Islands. Given the company’s lack of online presence and the large number of company names associated with Changpeng Zhao and Guangying Chen, it seems likely that Merit Peak Ltd is another front company for Binance. The Wall Street Journal reportedly saw documents signed by Zhao on Merit’s behalf “approving a capital injection by Merit into Binance.US in exchange for stock in the company”, and the SEC apparently already believes that Merit is a Binance company.

It seems beyond doubt that Merit Peak Ltd and Sigma Chain AG are Binance companies, despite their best efforts to hide this fact. Neither company appears in Binance’s publicly available documents, so they certainly did not disclose these affiliates to their clientele. The SEC’s investigation would appear to focus primarily on the volume of activity the two companies are responsible for within the Binance ecosystem and what advantages they may have enjoyed over regular Binance customers.

As The Wall Street Journal pointed out, aggrieved investors and regulators have begun to take action against exchanges that have affiliates on their platforms that trade against their own clients. The founders of BitMEX face criminal charges and private prosecution RICO for engaging in market manipulation and trading against its own clients, while the The SEC has already taken action against other exchanges that have not disclosed the affiliates that trade on their platforms.

The probe will be a rude awakening for Binance. After a year of fending off negative press and hounding regulators, the beleaguered exchange announced a $200 million strategic investment in Forbes, one of Binance’s fiercest critics in mainstream media, days later. only before this latest investigation was reported.

Forbes’ coverage of Binance included the leaking of an internal Binance proposal to circumvent and deceive US regulators by creating a compliance-focused US subsidiary, then surreptitiously telling customers how to evade geoblocks and access the Internet. Binance parent exchange. The plan appears to have (at least partially, if not entirely) manifested itself in the form of what is now known as Binance.US.

Whether this decision, as strategic as it is, is enough to stem the tide of negative press surrounding Binance remains to be seen. What is certain, however, is that Binance and Zhao cannot invest to get out of an SEC investigation.

The SEC will have to come online. The Commodity Futures Trading Commission (CFTC) already has two investigations into the company, including insider trading and market manipulation, and it has spent much of 2021 being blocked by banks and 86ed by a number of countries for compliance issues.

Is it still just FUD?

To follow The CoinGeek Crypto Crime Cartel series, which plunges into the flow of groups – one of BitMEX for Binance, bitcoin.com, Blockstream, Metamorphose, Coinbase, Ripple, Ethereum, FTX and Attached—who co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) market players.

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