Court documents submitted by the Securities and Exchange Commission (SEC) on Wednesday alleged that billions of dollars owned by Binance and its affiliates regularly flowed through Silvergate Bank and Signature Bank over the last four years.
Before their downfalls in March, the two financial institutions operated separate payment platforms, allowing companies in the blockchain industry to settle crypto transactions.
In its filing, the SEC disclosed that it found multiple accounts at Silvergate and Signature banks under the names of BAM Trading Services, Binance, and its CEO Changpeng Zhao. It is important to mention that BAM Trading Services is the company operating Binance’s American entity Binance.US.
Meanwhile, the SEC wants the court to freeze the corporate assets of Binance.US, arguing that its operator and Binance deposited billions of user funds into one bank account owned by Zhao’s company Merit Peak.
Binance’s Silvergate Bank Accounts
The SEC alleges that Merit Peak’s accounts at Silvergate Bank received over $22 billion between 2019 and 2022. Of that figure, $21.5 billion was transferred to the former BUSD issuer Paxos. The New York-based company halted the minting of more BUSD tokens in February following US regulators’ directives.
The SEC describes Merit Peak as a privately-owned crypto trading company. The agency claims the firm’s Silvergate accounts, which were closed by the bank last June, had commingled funds.
Further, the regulator said BAM Trading Service and Binance transferred $182 million and $140 million, respectively, to another Zhao company, known as Sigma Chain, between 2020 and 2023. As for Sigma Chain, the SEC describes the firm as a liquidity provider for fiat exchanges. The agency also alleges that Sigma Chain was involved in manipulative trading practices last year, artificially inflating Binance.US’ trading volume.
As per the SEC filing, BAM Trading Services’ Silvergate accounts received funds from other crypto players between 2018 and 2022, including crypto exchange Coinbase ($420 million), Sam Bankman-Fried’s Alameda Research ($315 million), and trading company Wintermute ($2.3 billion).
During that period, it is reported that the Binance.US operator transferred $3.2 billion to Wintermute and $1.4 billion to Alameda Research.
In total, seven Binance-affiliated firms had Silvergate bank accounts incorporated in the state of Delaware, Switzerland, the British Virgin Islands, and Seychelles. The SEC’s court filing mentions Binance senior executive Guangyin Chen as the controller of the accounts owned by Binance and BAM Trading Services. The SEC reports that as of April 1, all these accounts were empty.
Binance’s Signature Bank Accounts
The SEC documents show several accounts under the names of the aforementioned companies were available at Signature Bank. The agency claims it also found accounts of foreign firms owned by Zhao at the bank. According to the SEC, these companies are based in Singapore, Kazakhstan, Lithuania, UAE, Canada, and Seychelles.
The US regulator claims huge amounts of funds have flowed between Binance-affiliated accounts at Signature Bank and Silvergate Bank since 2019, where deposits got debited within a few days.
However, as of May 1, all Binance-linked accounts collectively held just $180,000 at the two banks. The SEC says most of the accounts were closed after the banks went under.
With that said, Binance, through its spokesperson, has announced plans to challenge the SEC’s move to court. The company claims the agency is not concerned about the safety of user funds but rather wants to frustrate crypto companies operating in the United States.
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