The SEC filing, which on Tuesday asked a US court to freeze
Binance's US assets, came a day after the SEC sued Binance, its billionaire CEO
Zhao, and the operator of its US affiliate exchange, for allegedly operating a
"web of deception."
In its 13 charges, the SEC alleged that Binance and Zhao
used Merit Peak and Sigma Chain, another trading firm controlled by Zhao, to
commingle corporate funds with client assets and use the monies "as they
please." This put customers' assets at risk while Binance sought to
"maximize" its profits, the SEC wrote in its civil complaint on
Monday.
In response to the SEC's lawsuit, Binance said it would
defend its platform vigorously. "All user assets on Binance and Binance
affiliate platforms, including Binance.US, are safe and secure," it said
in a statement on Monday.
The funds received by British Virgin Islands-based Merit
Peak between 2019 and 2021 flowed from Key Vision Development Ltd, also
controlled by Zhao, the SEC filing on Tuesday showed.
The $11 billion sent from Key Vision to Merit Peak form part
of the $22 billion in assets — mostly belonging to Binance and its US affiliate
— that Merit Peak received between 2019 and 2021, the SEC filing on Tuesday
showed.
Binance did not respond to Reuters' emailed questions on the
filing, and a spokesperson did not respond to a voice message.
Reuters reported last month that Key Vision and Merit Peak,
along with Binance's Cayman Islands holding company, formed the core of the
global crypto exchange's financial network.
In response to that article, Binance denied mixing customer
deposits and company funds, saying users who sent money were not making
deposits but rather buying Binance's bespoke dollar-linked crypto token.
The SEC said in its lawsuit that Merit Peak, which described
itself as trading with the "self-made wealth" of Zhao, operated on
both the Binance.com and Binance.US platforms.
The SEC said in the filing on Tuesday it could not determine
why an entity "purportedly trading" on Binance.US with Zhao's
personal funds "acted as a 'pass through' account for billions of dollars
of Binance Platforms customers' funds."
Between 2019 and 2023, Sigma Chain's US bank accounts
received almost $500 million, mostly from Binance and BAM Trading, with $15
million coming from Key Vision, the
SEC's Tuesday filing said.
FX wires
The SEC's filing on Tuesday gave further examples of how
Binance and Zhao, one of the most prominent figures in crypto, allegedly moved "billions
of dollars" through the United States.
Some Zhao-owned accounts have sent monies
"offshore" over the last few months, the SEC wrote in the filing.
Through 2022, a US account for a company called Swipewallet,
of which Zhao is the beneficial owner, sent $1.5 billion in foreign exchange
wires offshore, the SEC said in the filing without elaborating. The SEC said in
such processes, dollars are converted to a foreign currency before transmitting
to a beneficiary.
Binance acquired Swipe, a digital wallet and debit card
platform, in 2020. There have been no public posts on Swipe's social media
accounts since early last year. Swipe did not respond to a request for comment.
In some of the most detailed examples of the fund transfers
by Binance and Zhao, the SEC's filing on Tuesday alleged that on January 1 this
year, $840 million was deposited into eight companies owned by Binance and
Zhao, with $899 million withdrawn from those accounts "during that same
time frame." At the end of March, all but one of the accounts had a
balance of zero, the SEC said.
The SEC's filing also said between January and March this
year, multiple Binance bank accounts then wired over $162 million offshore to a
foreign account belonging to a Singapore company beneficially owned by
Binance's back office manager, Guangying Chen, a close associate of Zhao.
Binance did not respond to requests for comment on these
alleged transfers.
Some money was also sent from Sigma Chain to Chen, the SEC
said, without elaborating. Chen did not respond to Reuters' requests for
comment. © Reuters