Is Binance.US the next FTX?

By ZeroRequiem | Zero Ex | 16 Feb 2023

Hey Peeps!

On February 16th, Reuters dropped bombshell report that claims Binance's affiliate company in the United States, Binance.US, moved $400 million to Merit Peak Ltd, which is a trading firm managed by Binance CEO Changpeng "CZ" Zhao.

Not that much is know about this small trading firm, Merit Peak Ltd, however last year the SEC announced they were investigating trading firms linked to Binance, including this Merit Peak Ltd company.

During the first three months of 2021, large sums of money, totaling $400 million, were transferred from Binance.US's Silvergate bank account to this Merit Peak Ltd.

Reuters states they were unable to determine the reason for the transfers, and even worse, whether or not any of the transferred money belonged to Binance.US customers.

Reuters also highlights that Binance.US's public terms said its customers' dollar deposits were held at Silvergate, when it was quite possible that these funds were being moved around.

These transfers were initiated using Silvergate's proprietary Silvergate Exchange Network (SEN), which is only to be used for Binance's corporate clients.

According to the report, Former Binance.US CEO, Catherine Coley, inquired within the company regarding these "unexpected" transfers, but was never given a straight answer. Months later, Coley was fired as the head of Binance.US.

"The money transfers suggest that the global Binance exchange, which is not licensed to operate in the United States, controlled the finances of Binance.US, despite maintaining that the American entity is entirely independent and operates as its 'US partner.' The Department of Justice and the Securities and Exchange Commission have sought information from Binance and Binance.US about their relationship as part of ongoing investigations into potential breaches of financial rules, including whether Binance is using the American exchange as cover for doing business in the U.S."

- Angus Berwick and Tom Wilson, Reuters

If this is actually proof of Binance using the Binance.US company to move customer funds around, this would truly be unnerving due to the conflict of interests.

Binance and Binance.US are supposed to be separate entities, and regardless it would be odd for them to be transferring such a large amount of customer funds around.

I have an account with Binance.US myself, and news of this has made me uneasy. I will not say I am worried about the exchange collapsing, but if this is true, then it opens Binance up to lawsuits and regulations in the United States.

Luckily, the vast majority of my funds are always locked away safe on my Ledger Nano hardware wallet.

What are your thoughts about this news?

Is this concerning, if you are a Binance.US customer?

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