Binance Diverts $12 Billion to Companies Controlled by CZ, SEC Alleges

By 0xK2 06/8/23 8:21 AM

Binance CEO Changpeng Zhao, commonly known as CZ, and Guangying Chen, a prominent figure within the company, have been accused by the Securities and Exchange Commission (SEC) of receiving billions of dollars in customer funds. The allegations were revealed in a recent court document filed by the SEC.

According to the court filing, the funds in question were transferred to entities controlled by CZ through an intermediary holding company called Key Vision Development Limited. Sachin Verma, an accountant employed by the SEC, provided testimony and evidence to support these claims.

The SEC has expressed perplexity over the transfer of such significant amounts of money to entities controlled by CZ. The court filing states, “The SEC has been unable to determine why a Zhao-controlled entity that was purportedly trading on the Binance.US Platform using Zhao’s personal funds would have acted as a ‘pass through’ account for billions of dollars of Binance Platforms customers’ funds.”

Sachin Verma’s forensic analysis of bank statements belonging to Binance and CZ’s web of companies reportedly revealed that $12 billion was sent to Zhao, while $162 million was transferred to a company in Singapore controlled by Guangying Chen. Notably, the majority of these funds are alleged to be held in offshore accounts.

The court documents also highlight that Chen, who serves as Binance’s back office and financial manager, controlled various companies that did not bear an obvious connection to Binance in their names. This raises further questions regarding the nature of these transactions.

Binance has vehemently denied commingling customer deposits with company funds, maintaining that an entity known as Merit Peak serves as a platform for CZ’s personal trading activities. However, the SEC’s investigation into Binance.US, which began in 2020, alleges that Binance held custody of its U.S. affiliate’s assets until December 2022, despite claiming that the two entities operated independently.

The SEC’s pursuit of a temporary restraining order to freeze assets on Binance.US indicates the seriousness of the allegations. A court date has been set for June 13 to address the restraining order, marking a critical juncture in the ongoing legal battle between Binance and the SEC.

This latest development could have far-reaching implications for Binance, one of the world’s largest cryptocurrency exchanges. The outcome of the court proceedings will undoubtedly be closely watched by industry stakeholders, regulators, and cryptocurrency enthusiasts alike, as it has the potential to significantly impact the future of Binance and CZ’s involvement within the company.

As the legal proceedings unfold, it remains to be seen how Binance and its executives will respond to these allegations. The potential consequences for the cryptocurrency industry as a whole underscore the need for greater regulatory scrutiny and transparency within the rapidly evolving digital asset landscape.

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