Binance Moved US Affiliate’s $400M via Secret Access to Silvergate Account

On Thursday, February 16th, Reuters reported that Binance moved $400 million from the Silvergate account of its US affiliated to a trading firm listing Changpeng Zhao as its manager. According to the same report, Binance called the information “outdated”.

Binance Moved $400 From US Affiliate to a Zhao-Managed Firm in 2021

According to a Thursday report, internal messages and bank records reviewed by Reuters revealed that Binance had secret access to the Silvergate account of its US affiliate—Binance.US. The access was allegedly used to transfer $400 million to a trading firm called Merit Peak. The trading firm lists Changpeng Zhao—best-know as the CEO of Binance international—as its manager.

The transfers reportedly occurred in early 2021. However, a spokesperson from Binance.US allegedly called Reuters’ information outdated. Furthermore, the report states that the ultimate fate of the money—nor whether the transferred funds included user assets—could not be determined.

Additionally, the reasons behind the transfers could also not be discerned. A report from early 2022 listed Merit Peak as one of Binance’s trading affiliates facing an SEC probe. Furthermore, Binance recently confirmed its regulatory compliance in the past was lacking but stated that the issues have mostly been fixed since and that the exchange is actively working with relevant agencies in the US.

The report had no dramatic impact on the price of Binance’s BNB. However, Bitcoin went into a sharp decline to around $24,500 from its Thursday high of over $25,000. Furthermore, the shares of Silvergate Capital were down nearly 20% on the day.

Binance Under Increased Regulatory Scrutiny

Early February was a notable spike in regulatory activity targeting digital assets that even managed to temporarily halt a rally started in January. The first big blow of the month came on the 9th when it was announced that Kraken, one of the major cryptocurrency exchanges, agreed to settle with the SEC and end its crypto staking service in the United States.

Around the same time, it was reported that the New York Department of Financial Services (NDFS)  is investigating Paxos over its Binance-branded stablecoin BUSD and just days later, the company was ordered to stop minting the token. Not long after, it was alleged that another stablecoin issuer—Circle—filed a complaint against Paxos leading to the investigation.

Additionally, the same report indicated that Binance repeatedly failed to properly collateralize its tokens and that Paxos received the order to stop minting BUSD as it failed to conduct regular risk assessments and do its due diligence. Paxos also revealed it had received a Wells notice from the SEC alleging that the stablecoin constitutes an unregistered security.

While CZ publicly distanced his exchange from BUSD and called the stablecoin a very minor part of its business model, Wednesday brought reports of an investigation into Binance’s operations conducted by US regulators. By the evening of February 15th, Binance revealed that the exchange is expecting to have to pay penalties to settle its issues with United States regulators.

This article originally appeared on The Tokenist

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