Media: SEC probes trading firms affiliated with Changpeng Zhao

SEC is studying the link between Binance.US and two trading firms affiliated with the founder of the parent company, Changpeng Zhao. The Wall Street Journal, citing sources, reports.

Since 2019, Sigma Chain AG and Merit Peak Ltd have acted as market makers on Binance.US. At least by the end of 2021, they were controlled by Zhao, according to sources.

Regulators were interested in how the platform disclosed such affiliations to clients. Sources also reported concerns within Binance.US’s legal and compliance divisions regarding the provenance of funds at Sigma Chain AG and Merit Peak Ltd.

The platform’s website states that firms affiliated with the exchange may carry out trading operations, but their names are not disclosed. A representative stressed that, as a private company, Binance.US is not obliged to disclose information about its investors or corporate structure, but it can be provided to regulators upon request.

The publication noted that in 2015 the SEC initiated similar investigations into exchanges that did not disclose the existence of affiliated market makers.

To take enforcement action, regulators would need to show that the assets listed on the platform have characteristics of securities. In other words, that the assets possess the characteristics of securities. The WSJ reminded that in 2017 Binance launched its own token Binance Coin.

Earlier in January, the SEC promised to tighten oversight of bitcoin exchanges.

That same month, Reuters, in its own investigation, concluded that Binance repeatedly hid information from regulators, flouted KYC procedures and acted against the recommendations of its own compliance department.

In March 2021, Bloomberg reported that Binance’s activities were under examination by the CFTC for possible allowing US residents to trade crypto-derivatives without the appropriate license.

Earlier in Binance.US they unveiled plans to raise $200 million ahead of an IPO.

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