The Securities and Exchange Commission (SEC) is investigating the relationship between the US branch of cryptocurrency exchange Binance and two trading firms that have ties to Binance CEO Changpeng Zhao, as reported by The Wall Street Journal. The two firms, Merit Peak Ltd. and Sigma Chain AG, serve as market makers that continually buy and sell crypto on Binance.US, helping to lower price volatility.
The SEC is particularly concerned with the way Binance discloses its ties to the two trading firms, WSJ reports. On the Binance.US website, the crypto exchange tells users that affiliated market makers can trade on the platform. However, it doesn’t name specific firms.
The SEC has asked Binance.US for more information about both companies. According to the WSJ, corporate documents from 2019 indicate a link between Zhao and the two firms. Former executives also reportedly say Zhao started controlling both companies last year.
Binance created its separate Binance.US arm in 2019 to comply with US regulations. The Internal Revenue Service and Department of Justice opened an investigation into the Cayman Islands-based company last year, with officials specializing in money laundering and tax offenses looking into the case. Last September, the investigations expanded to include the Commodity Futures Trading Commission to probe potential insider trading and market manipulation. Investigations are still ongoing.