Reuters reports Binance controlled the accounts of an independent US affiliate

Binance’s chief executive, Chinese national Guanyin Chen, in 2019 and 2020 managed five bank accounts at Silvergate Bank that belonged to an allegedly independent US affiliate of the company, including an account holding funds from American customers. Reuters reports, citing the documents reviewed.

According to the agency, Chen and her deputies were authorized to move funds held on the banking accounts. Reviewing internal messages, reporters also found that Binance.US staff asked Chen’s team to process payments, including to cover payroll for their employees.

Binance.US, the trading platform, was launched in mid-2019 by the operating company BAM Trading, led by Catherine Coley. Documents show that Binance’s CEO Changpeng Zhao owned BAM Trading through a number of offshore entities.

Citing internal corporate messages, Reuters says that in December of the same year, an unnamed Binance.US employee asked Coley to sign a banking resolution to “ensure that Chen could manage the US subsidiary’s bank accounts”.

In a resolution document reviewed by Reuters and prepared by Silvergate’s public relations liaison, there was a request that Coley permit Chen to “open accounts, transact, and otherwise manage” the accounts on behalf of BAM Trading. A person familiar with the document said Coley approved it.

According to bank records from December 2019 through January 2020, Chen signed additional agreements with Silvergate to act as the “primary administrator” of the client deposit account, the corporate accounts, and three other bank accounts. The agreements stated that the authorized person could withdraw funds from the accounts or deposit them, as well as appoint others for this purpose.

Company messages show that Chen subsequently handed over management of the account transactions, including payments to cover Binance.US payroll, to her deputy Susan Lee.

Later that year, Coley told colleagues that she and her finance team were not administrators of BAM Trading’s accounts and had view-only access. Reuters notes that this arrangement left the CEO of Binance.US without final control over the company’s finances.

The agency believes that Chen retained control over the bank accounts at least until the beginning of 2021. Journalists failed to find evidence that she or Lee withdrew funds from the Binance.US client deposit account.

Krishna Juvvadi, head of legal at Binance.US, told Reuters that some of the accounts identified by the agency as being managed by Chen were “institutional client accounts.” The exchange did not provide additional information about Chen’s role.

Binance.US had previously denied that its accounts were controlled by the parent company. Krishna Juvvadi, head of legal, told Reuters in April that BAM Trading employees have had “exclusive control” since the company’s founding in 2019.

However, commenting on the agency’s latest article, Hertenstein said that since late 2021, when the current Binance.US chief executive Brian Schroeder took office, “no one other than official Binance.US personnel had control or access” to the subsidiary’s accounts. Hertenstein did not explain the discrepancy between the timeframes he cited and those cited by Juvvadi.

The agency had previously reported Chen’s access to a Binance.US account at Silvergate from which in 2021 more than $400 million was routed to Merit Peak, a trading firm controlled by Zhao Changpeng. Binance.US at the time called Reuters’ findings “not accurate,” attributing the assets to the firm’s own trading income.

Based on the information, Reuters concluded that Binance exerted tight control over Binance.US, despite both firms’ assertions of independence.

In a ForkLog statement, a Binance spokesperson said they have nothing to share on the matter at present.

As Reuters reported in October 2022, the outlet published an article that Zhao planned to “isolate” Binance from government oversight in the United States by creating a new American exchange.

In March 2023, a lawsuit against Binance and Changpeng Zhao CFTC. The agency maintains that the platform violated derivatives trading rules by operating without proper registration and “willfully evading US law.”

In May, Reuters published a piece about Binance merging customer funds with the company’s revenues in 2020 and 2021 in breach of US financial rules requiring customer money to be kept separate. According to the outlet, the exchange almost daily moved billions of dollars to the company’s accounts at the now bankrupt Silvergate Bank.

Binance then denied the agency’s findings, saying that it keeps “user and corporate funds in entirely separate registers”.