• Binance maintains that it did nothing wrong or suspicious to cheat on customers.

• Binance.US reportedly moved more than $400 million in three months in 2021 from California-based Silvergate Bank to Merit Peak Ltd, a trading firm managed by Binance CEO Changpeng Zhao.

Reuter reported yesterday that Binance.US moved more than $400 million in three months in 2021 from California-based Silvergate Bank to Merit Peak Ltd, a trading firm managed by Binance CEO Changpeng Zhao. It is reported that the Binance.US account was registered under the name BAM Trading. 

Reuters report on the exchange

According to the reports, the transfers to Merit Peak started in late 2020. Interestingly, Reuters could not establish the reason behind the transfers and whether the money belonged to the customers. Around that time, its public terms of use indicated that customers’ deposits were held in Silvergate and a Nevada-based custodian firm called Prime Trust LLC. 

Reuters also reported that the Binance executives once became concerned about the outflows of funds as they were done without their knowledge. Catherine Coley, CEO of Binance.US at that time demanded an explanation from the executives concerning the transfers. 

Coley wrote: “Where are those funds coming from?” However, Binance executive, Susan Li, could not provide any explanation for the transfer. Li responded that Merit Peak existed as a vendor facilitating trading on the Binance.US platform in addition to providing loans and capital injection to the American exchange. Reuter also disclosed that a person with direct knowledge of the transfer disclosed that an unspecified amount of the $400 million was sent to the Silvergate account of a Seychelles-incorporated firm called Key Vision Development Limited. 

Last year, Reuter reported that Binance created Binance.US in 2019 as a de facto subsidiary to draw away regulators’ attention from the global exchange. 

According to them, the transfers reveal that the global Binance exchange controls the finances of Binance.US despite lacking the license to operate in the US. It has also claimed that the two entities are independent. As part of an investigation into possible breaches of financial rules, the Department of Justice and the Securities and Exchange Commission (SEC) have called for information concerning the relationship between Binance and Binance.US. 

Binance says it did nothing wrong

Reporters indicated that a Binance.US spokesperson, Kimberly Soward, refused to give answers concerning the transfers. However, she stated that Reuters used outdated information in its report. According to her, Merit Peak is neither a trading platform nor still providing services on the Binance.US platform. She also mentioned that only Binance.US employees have access to the bank account of the US company. 

There have been many attempts to draw parallels between https://t.co/AZwoBOgsqS and fraudulent exchanges that have gone bankrupt. The real facts speak for themselves: there is no comparison. Our leadership team is staffed with former DOJ, SEC, FBI, and NYFed employees who are… https://t.co/5etl0z3ZUX

— Binance.US 🇺🇸 (@BinanceUS) February 16, 2023

While this report could damage the reputation of the crypto exchange, Binance has provided a swift response with some answers to the allegation. The company maintains that it did nothing wrong or suspicious to cheat on customers. Firstly, Binance admitted that there was a market-making firm called Merit Peak that operated on the Binance.US platform, however, its activities were stopped in 2021. According to Binance, its market maker is on the platform, indicating that firms fairly compete for rebates.

Binance.US has never -and will never – trade nor lend out customer funds.

Binance.US always maintains 1:1 reserves, and is subject to regular audits and regulatory reporting by government entities.