The Securities and Exchange Commission (SEC) lawsuit against Binance, the world’s largest crypto exchange, raises worries about customer funds.
On Monday, the U.S. regulator accused Swiss-registered Sigma Chain of “manipulative trading” to boost Binance’s trade volumes.
According to the SEC’s civil lawsuit and Reuters, British Virgin Islands-based Merit Peak used billions of customer dollars to buy Binance’s dollar-linked “BUSD” cryptocurrency.
The two firms permitted Binance to mix corporate and customer funds and use them “as they please,” the SEC wrote. The SEC noted that Binance’s attempt to “maximize” earnings jeopardized clients’ assets.
Binance said it would “vigorously defend” the SEC claims and that user assets were “safe and secure.” This article’s email inquiries about the two trading firms went unanswered. Binance representatives were unavailable by phone.
Last year’s business filing showed Zhao’s address as an apartment in Silicon Oasis, a low-cost Dubai neighborhood.
On Tuesday, security told a Reuters reporter that the apartment had been abandoned for months, and no one answered the door. After FTX’s collapse last year, regulators scrutinized Binance’s handling of billions in user assets.
John Reed Stark, former chief of the SEC’s Office of Internet Enforcement, said the SEC’s case showed the dangers clients took by storing their cash on the exchange without “any regulatory oversight of any of the parties involved.”
Binance can shift your assets. “When everything crashes, you’re last,” Stark told Reuters.
The SEC move followed the March Commodity Futures Trading Commission allegations against Binance, also under investigation by the U.S. Justice Department for money laundering and sanctions violations.
