SEC Investigates Binance Over Alleged Asset Mismanagement

Binance CEO Faces SEC Allegations

Binance, a leading crypto exchange, and its CEO, Changpeng Zhao, are under scrutiny by the U.S. Securities and Exchange Commission (SEC). The SEC has filed a lawsuit alleging that Binance and Zhao used offshore trading firms, Merit Peak and Sigma Chain, to improperly handle client assets. This legal action follows a broader investigation into Binance's financial practices.

Allegations of Asset Mismanagement

The SEC claims that Binance and Zhao engaged in deceptive practices by commingling corporate and client funds. Allegations suggest that Merit Peak, an entity controlled by Zhao, received approximately $11 billion in client assets from a Seychelles-based company. These funds were reportedly transferred to maximize profits, putting customer assets at risk.

Financial Network Under Investigation

The SEC's filing highlights that between 2019 and 2021, Merit Peak received $22 billion, primarily from Binance and its U.S. affiliate. The agency is concerned about the lack of transparency and the use of accounts as "pass through" for large sums of money. Additionally, the SEC noted financial movements involving Sigma Chain, further complicating Binance's legal standing.

Offshore Transactions and Fund Transfers

Key to the SEC's case are the offshore transactions facilitated by Zhao's companies. Notably, a U.S. account linked to Swipewallet, acquired by Binance in 2020, sent $1.5 billion in foreign exchange wires offshore. The filing also detailed substantial fund transfers within Binance's network, raising questions about financial governance.

Binance's Defense and Ongoing Investigation

Binance has denied the allegations, asserting that all user assets are secure. The company claims that financial activities were legitimate, involving the purchase of Binance's crypto token rather than deposits. Despite these assurances, the SEC continues to probe the financial activities of Binance and its affiliates, seeking clarity and accountability.