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Binance CEO’s offshore trading accounts received billions in customer funds, US SEC declares

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TL;DR Breakdown

  • Binance CEO CZ and Guangying Chen allegedly received billions of dollars in customer funds, according to the SEC.
  • Funds were funneled through an intermediary holding company controlled by CZ, raising questions about the commingling of customer deposits and company funds.
  • The SEC has filed a lawsuit and is seeking a temporary asset freeze on Binance.US, while Binance denies the allegations and pledges to defend its platform.

The US Securities and Exchange Commission (SEC) has alleged that Binance CEO Changpeng Zhao, popularly known as CZ, and Guangying ‘Helina’ Chen, Binance‘s back office and financial manager, received billions of dollars of customer funds. According to new court documents filed by the SEC yesterday, the funds were funneled through an intermediary holding company called Key Vision Development Limited, controlled by Zhao.

Binance’s financial network unveiled

The SEC’s allegations are based on testimony provided by Sachin Verma, an accountant employed by the regulator. Verma’s forensic analysis of bank statements and web of companies connected to Binance and Zhao reportedly revealed that $12 billion was sent to Zhao. In comparison, $162 million was sent to a company controlled by Chen in Singapore

The court documents also highlight multiple companies controlled by Zhao and Chen, lacking any apparent connection to Binance. Most of the funds Zhao and Chen received were held in offshore accounts, according to the SEC documents.

The SEC has been investigating Binance.US since 2020 and alleges that Binance held custody of its US affiliate’s assets until December 2022, despite publicly claiming that the two entities were separate. As a result, the SEC is seeking a temporary restraining order to freeze assets on Binance.US.

Binance has publicly denied any commingling of customer deposits and company funds. The exchange claims that Merit Peak, the offshore trading company also controlled by CZ, serves as a vehicle for him to trade his “self-made wealth.” Binance has repeatedly assured users that their assets on the platform, including Binance.US, remain safe and secure.

The SEC’s lawsuit also shed light on the intricate financial network of Binance. It revealed that Merit Peak and another trading firm called Sigma Chain, both under Zhao’s control, were allegedly used to mix corporate funds with client assets. According to the SEC’s civil complaint, this practice exposed customer assets to unnecessary risk while Binance focused on maximizing profits.

In response to the lawsuit, Binance has pledged to defend its platform against the SEC’s allegations vigorously. The exchange aims to reassure its users that their funds are safeguarded and remain fully operational. However, a court date has been scheduled for June 13 to address the SEC’s request for a restraining order.

The SEC’s court documents also revealed the inner workings of Binance’s global financial network. Key Vision Development Ltd, Merit Peak, and Binance’s Cayman Islands holding company formed the core of this intricate network, facilitating the movement of funds and assets within and outside the exchange, according to the SEC.

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