The U.S. Securities and Exchange Commission (SEC) has submitted a new court filing to support its lawsuit against the world’s largest cryptocurrency exchange, Binance. The filing, which does not include additional charges, details transactions involving several billions of dollars of customer funds moving through now-defunct Silvergate Bank and Signature Bank, allegedly carried out by entities linked to Binance and its officials, including chief executive Changpeng Zhao. 

See related article: Crypto industry reacts to SEC’s lawsuit against Binance

Fast facts

  • Sachin Verma, an accountant employed by the SEC, said in his filing to the United States District of Columbia court on Wednesday, that some of the funds were moved to accounts suspected to belong to offshore firms linked to Zhao and Binance, in various regions including theSeychelles, Lithuania and Kazakhstan.
  • According to the documents, from April 2019 to April 2023, numerous accounts linked to Zhao and associate Guangying Chen were held with Silvergate and Signature, two U.S. banks that collapsed earlier this year.
  • The filing claimed that Merit Peak Limited, a British Virgin Islands company beneficially owned by Zhao, allegedly received US$22 billion between 2019 to 2021, with the majority of these funds subsequently transferred to a foreign affiliate of Paxos Trust Company, the issuer of the BUSD stablecoin. 
  • In a tweet that followed the latest SEC filing, Zhao responded to the allegations: “This is simply false. Not sure if it’s the journalist or the source. To the best of my knowledge, Binance.US had in total roughly $2 billion in user funds. This number in USD equivalent fluctuates a little as crypto prices change. And declining as users withdraw due to recent news. All user funds are accounted for, and never left the Binance.US platform (unless users withdraw themselves of course), ever.”
  • On Monday, the SEC filed a lawsuit against Binance, its U.S. branch, and Zhao with charges related to securities violations. Binance faces 13 charges in the lawsuit, including the unregistered offer and sale of the BNB and BUSD tokens and unregistered activity related to its Simple Earn and BNB Vault products and its staking program. 
  • “Because of our size and global name recognition, Binance has found itself an easy target caught in the middle of a U.S. regulatory tug-of-war,” a Binance spokesperson said, denying the allegations. “The SEC’s own actions throughout this matter reveal its hasty approach to this investigation.”
  • Following a surge of bankruptcies and liquidations last year triggered by the downfall of Sam Bankman-Fried’s FTX exchange, U.S. regulatory bodies have been stepping up their scrutiny and enforcement actions on cryptocurrency exchanges. 
  • On Tuesday, a day after the SEC filed its lawsuit against Binance, the regulator sued Coinbase, the largest crypto exchange in the U.S., for allegedly violating securities rules.
  • BNB, the native token of Binance, fell 5.62% to US$261 in 24 hours to 5.20 p.m. in Hong Kong, bringing its weekly loss to 14.13%, according to CoinMarketCap data. 

(Updates to change headline, add Zhao response in bullet point four.)

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