• Thu. Apr 18th, 2024

SEC Investigating Binance due to Links with Two Market Makers

Feb 17, 2022

According to a report from the Wall Street Journal, Binance US is currently being investigated by the US Securities and Exchange Commission (SEC). The said investigation is because of the crypto exchange’s relationship with two prominent market makers. The report indicated that the SEC suspects that the chief executive of Binance, Changpeng Zhao (CZ) is affiliated with these trading companies. The report had been published back on Tuesday and the two firms that are involved in the said investigation of the Binance crypto exchange are Merit Peak and Sigma Chain AG. The report noted that the SEC had reached out to Binance US and asked it to share information about the nature of its relationship with the two market-making companies.

Furthermore, another aspect that is under investigation by the SEC is whether the crypto exchange has disclosed its relationship with the two companies to its client base. The report dictated that the securities regulator in the US had obtained information about the matter from different sources that had linked Binance US and its CEO with the two market makers. The sources that the SEC is referring to are corporate documents that date back to 2019 and also include testimonies that were given by Binance’s former executives.

Merit Peak and Sigma Chain AG had used the Binance US platform for buying and selling cryptocurrencies and had acted as market makers during the process for lowering the price volatility. No statement has been issued by the SEC about what action will be taken in case they are able to identify any wrongdoing. It should also be noted that the SEC itself has not confirmed whether it is investigating the crypto exchange in regard to this matter, or not. It is quite well-known that the regulatory agency wants to enforce regulations in the crypto space.

The SEC has already taken enforcement actions against a number of crypto companies and the total number is around 97. Penalties that the agency has received from the companies in question are about $2.35 billion. Some of the largest crypto companies that had been fined by the SEC include names like Poloniex and Blockchain Credit Partners. More recently, a penalty of $100 million was imposed on the crypto lending platform, BlockFi. Last year in May, there had been reports circulating the market about Binance being under investigation by the Internal Revenue Service (IRS) and the Department of Justice (DoJ).

The two bodies had been investigating the Binance US platform to prevent the use of cryptocurrencies for conducting illegal activities. Another report had surfaced in March last year, which disclosed that the Commodity Futures Trading Commission (CFTC) had launched an investigation into Binance due to the activity of the users on the crypto exchange. The CEO of the exchange, however, denied violating any laws in the US. However, it is important to note that the United States is not the only jurisdiction where Binance has had to deal with such problems. There have also been regulatory issues in Singapore, Thailand and Malaysia.

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