Binance CEO Changpeng Zhao's Offshore Trading Firm Received Nearly $11 Billion In Client Assets, US SEC Claims

Binance had previously denied commingling customer deposits with company funds.

In response to the SEC's lawsuit, Binance stated that it would vigorously defend its platform.

Source : Getty

According to a recent filing from the US Securities and Exchange Commission (SEC), Merit Peak, an offshore trading company controlled by Binance CEO Changpeng Zhao, received approximately $11 billion in client assets through a Seychelles-based firm established for customer deposits. The SEC filing, which requested a freeze on Binance's US assets, came shortly after the SEC filed a lawsuit against Binance, Zhao, and the operator of its US affiliate exchange, accusing them of operating a deceptive scheme.

As per a report by Reuters, the SEC's allegations include claims that Binance and Zhao utilised Merit Peak and another trading firm called Sigma Chain, both controlled by Zhao, to mix corporate funds with client assets and use the funds at their discretion. This put customer assets at risk while Binance sought to maximise profits, according to the SEC's civil complaint.

In response to the SEC's lawsuit, Binance stated that it would vigorously defend its platform and assured users that their assets on Binance and its affiliate platforms, including Binance.US, were safe and secure.

The $11 billion in funds received by Merit Peak between 2019 and 2021 originated from Key Vision Development Ltd, also controlled by Zhao, as revealed in the SEC filing. These funds are part of the $22 billion in assets received by Merit Peak during the same period, primarily belonging to Binance and its US affiliate.

In a previous report by Reuters, it was disclosed that Key Vision, Merit Peak, and Binance's Cayman Islands holding company formed the core of Binance's global financial network.

Binance had previously denied commingling customer deposits with company funds, stating that users who sent money were not making deposits but rather purchasing Binance's custom dollar-linked cryptocurrency token.

The SEC's lawsuit mentioned that Merit Peak, which described itself as trading with Zhao's "self-made wealth," operated on both Binance.com and Binance.US platforms.

The SEC's filing on Tuesday included additional examples of how Binance and Zhao allegedly transferred "billions of dollars" through the United States. The filing highlighted instances of Zhao-owned accounts sending funds offshore in recent months.

Furthermore, the SEC mentioned that between 2019 and 2023, Sigma Chain's US bank accounts received nearly $500 million, with the majority coming from Binance and BAM Trading, and $15 million from Key Vision.

The SEC's filing provided more detailed examples of fund transfers, revealing that on January 1 of this year, $840 million was deposited into eight companies owned by Binance and Zhao, with $899 million withdrawn from those accounts during the same period. By the end of March, all but one of the accounts had a zero balance, according to the SEC.

Additionally, the SEC stated that from January to March 2023, multiple Binance bank accounts wired over $162 million offshore to a foreign account belonging to a Singapore company beneficially owned by Binance's back office manager, Guangying Chen, who is a close associate of Zhao. The SEC also noted that $32 million was sent from Sigma Chain to Chen, without providing further details.

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