WSJ reports inflated Binance.US trading volumes

During the launch of Binance’s American arm in 2019, the first hour of Bitcoin trading volume surpassed $70,000. The Wall Street Journal reports this.

According to notes from CEO Changpeng Zhao (CZ) that reporters reviewed, demand came not from external traders but from the platform itself.

The WSJ authors said that such a situation could signal ‘fictitious trading’, making it difficult for regulators to assess market depth.

On June 5, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Binance and Zhao. The agency brought 13 charges, including the sale of unregistered securities. On June 6, the regulator filed a motion to freeze the digital assets of the exchange’s U.S. subsidiary.

In 2022, the agency took an interest in trading firms linked to Zhao. One of them was Sigma Chain, which acted as a market maker and, according to the SEC, belonged to Zhao himself.

The WSJ noted that Sigma managed dozens of accounts on the platform. The regulator alleges that, the day after Binance.US’s launch, fictitious trades between the market maker’s accounts and exchange employees accounted for nearly 70% of trading volume.

Representatives of the company fully deny involvement in such activity.

“We are firmly convinced that the SEC’s allegations of fictitious trading are completely unfounded and are based on a fundamental misunderstanding of the facts and misapplication of the relevant law,” said Binance.US.

However, internal messages published by the Commission show that top managers and employees of Binance knew that the platform used such methods. The messages also mention Sigma Chain and other companies.

“We believe that these trades were fully legitimate interactions using independent strategies,” countered the representatives of the trading platform.

On June 9, Binance.US users lost the ability to deposit dollars, prompting sales from those who wanted to withdraw their funds in fiat. Against this backdrop, the BTC/USD quotes showed a discount — the figure reached about $2,200 (7.3%).

In June, the SEC and Binance entered into an agreement on client funds in the United States. The exchange resumed withdrawals of assets, but warned that the situation could still change.