Reuters Says Binance Controls Independent US Branch Accounts

CFTC files lawsuit against Binance and Changpeng Zhao
CFTC files lawsuit against Binance and Changpeng Zhao

Guangying Chen, the chief executive of the Binance cryptocurrency exchange, managed five bank accounts with Silvergate Bank in 2019 and 2020, owned by an allegedly independent US subsidiary of the company, including an account with funds from American clients. It is reported by Reuters with reference to the studied documents.

According to the agency, the powers of Chen and her deputies included the transfer of funds stored in bank accounts. After reviewing internal messages, the reporters also found out that Binance.US employees asked the Chen team to process payments, including to cover the salaries of their employees.

The Binance.US trading platform was launched in mid-2019 by operating firm BAM Trading, led by Katherine Coley. The documents show that Binance CEO Changpeng Zhao owned BAM Trading through a number of offshore companies.

Citing internal corporate communications, Reuters claims that in December of the same year, an unnamed Binance.US employee asked Kolya to sign a banking authorization to “ensure that Chen can manage the bank accounts” of the US branch.

The resolution document, reviewed by Reuters and prepared by Silvergate’s communications manager, asks Kolya to allow Chen to “open accounts, transact and otherwise manage” accounts on behalf of BAM Trading. A person familiar with the document said that Kolya approved of it.

According to bank records for the period December 2019 to January 2020, Chen signed additional agreements with Silvergate to act as the “primary administrator” of the client’s deposit account, corporate account, and three other bank accounts. The agreements stated that the authorized person could withdraw funds from the accounts or deposit them, as well as appoint other persons to do this.

Company reports indicate that Chen subsequently transferred control of account transactions, including payments to cover Binance.US salaries, to her deputy, Susan Li.

Later that year, Kolya informed colleagues that she and her finance team are not BAM Trading account administrators and have view-only access. This arrangement left the CEO of Binance.US without ultimate control over the company’s own finances, Reuters noted.

The agency believes that Chen retained control of the bank accounts until at least early 2021. At the same time, the journalists could not find evidence that she or Li withdrew funds from the deposit account of Binance.US clients.

Reuters spokesman Christian Hertenstein noted in a commentary to Reuters that some of the accounts identified by the agency as operated by Chen were “institutional client accounts.” The exchange did not provide additional information about Chen’s role.

Previously, Binance.US denied that their accounts were managed by a parent company. The head of the legal department, Krishna Juvwadi, told Reuters in April that the employees of Binance.US operator, BAM Trading, have had “exclusive control” since its founding in 2019.

However, commenting on the agency’s recent article, Hertenstein stated that since the company’s current chief executive, Brian Schroeder, took over in late 2021, “no one other than Binance.US officials has had control or access” to the affiliate’s accounts. Hertenstein did not explain the discrepancy between the time periods named by him and Juwwadi.

The agency has already reported on Chen’s access to one Binance.US account at Silvergate, from which more than $400 million flowed to Merit Peak, a trading firm controlled by Changpeng Zhao, in 2021. At the time, Binance.US called Reuters’ findings “untrue,” attributing the said assets to the firm’s own trading income.

Based on the data obtained, Reuters concluded that Binance exercised tight control over Binance.US, despite both firms claiming that they operate independently.

In a comment to ForkLog, a spokesperson for the exchange stated that they have nothing to share about this right now.

Recall that in October 2022, Reuters released an article stating that since 2018, Zhao planned to “isolate” Binance from control by the US authorities by creating a new American exchange.

In March 2023, Zhao filed a lawsuit against Binance and Changpeng CFTC. According to the agency, the platform violated the rules for trading derivatives by operating without proper registration and “deliberately evading US law.”

In May, Reuters reported that Binance pooled customer funds with the company’s 2020 and 2021 earnings in violation of U.S. financial regulations that require customer money to be kept separate. According to the publication, the exchange transferred billions of dollars almost daily to the company’s accounts in the now bankrupt Silvergate Bank.

Binance then denied the agency’s information, saying that it stores “user and corporate funds in completely different registries.”

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