Binance.US Faces SEC Probe Over Trading Affiliates: Report

The two affiliates have ties to Binance founder Changpeng Zhao, The Wall Street Journal reported.

AccessTimeIconFeb 15, 2022 at 7:16 p.m. UTC
Updated May 11, 2023 at 7:10 p.m. UTC

The Securities and Exchange Commission (SEC) is investigating the relationships between the U.S. arm of cryptocurrency exchange Binance and two firms owned by Binance founder Changpeng Zhao, The Wall Street Journal reported.

  • The two firms, Sigma Chain AG and Merit Peak Ltd., trade cryptocurrencies on Binance.US as market makers, or traders who continuously buy and sell to help ease price volatility, profiting from the small differences in bid and ask prices.
  • Corporate documents from 2019 and former executives confirmed Zhao’s ties to the companies, and the executives said he was in control of both as of the end of last year.
  • The main concern is whether trading affiliates receive preferential treatment from the exchange in terms of access or speed, according to The Wall Street Journal.
  • Sources told The Wall Street Journal that regulators are probing how much Binance.US disclosed to customers about its ties to the firms, and the SEC has requested information from Binance.US.
  • "Market-making activities are standard in both traditional finance and crypto, such as Citadel Securities or those on FTX performed by Alamada Research, a business owned by FTX’s founder Sam Bankman-Fried. They ensure liquidity and directly support a healthy, vibrant, and efficient marketplace to the benefit of end-users," a Binance spokesperson told CoinDesk in response to the report.
  • In 2019, Binance was banned from operating in the United States and opened Binance.US to comply with U.S. laws.
  • Binance came under increased scrutiny from financial watchdogs around the world last year, including a Commodity Futures Trading Commission probe into whether Binance.US allowed unlawful derivatives trading.

UPDATE (Feb. 15, 19:24 UTC): Added response from Binance.


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Brandy Betz

Brandy covered crypto-related venture capital deals for CoinDesk.