Both banks developed a reputation as “crypto-friendly” lenders, and both folded within days of each other earlier this year. Silvergate self-liquidated, while Signature was taken over by regulators following a run on deposits.
According to the filing, the funds being moved involved “large amounts of money” moving in and out within days, with Silvergate handling more than $50 billion in deposits and Signature overseeing the remainder, a little more than $19 billion.
“It’s critical to note that the funds referenced are strictly corporate funds and not user assets,” a Binance spokesperson said in a statement issued to PYMNTS. “Binance’s top priority is protecting user assets, which are held 1:1. These accounts represent revenue received by the business for products provided and/or services rendered. Like every other company across the globe, our revenue is used to cover the operational costs of running our global business.”
The statement argued that these type of transactions are typical of most global companies and necessary to make sure Binance could “facilitate our products and services in a stable and compliant manner.”
Court documents showed Binance officials, including Zhao, moving vast sums of money through the regional banks to accounts connected to companies around the world, in places ranging from Kazakhstan to Canada.
The activity — which happened between April 2019 and April of this year — caught the attention of anti-money laundering (AML) experts, according to published reports Wednesday.
“It is one of the more sizable cases of financial misconduct I’ve ever seen — the documentation is overwhelming,” Louise Shelley, a George Mason University professor specializing in money laundering, told The New York Times.
Shelley added that she was “amazed” that the banks had shifted billions of dollars overseas for Binance for such a lengthy period.
“This is just so mammoth and should be raising red flags,” she said, per the report.
And in an interview with Bloomberg News, the Gallatin Group’s John Popeo noted that banks are typically expected to track the flow of funds for atypical transactions, including large transfers like these.
“If there’s a frequent large cash movement — it could be extraterritorial or it could be domestic — that to me is a red flag,” said Popeo, whose company advises banks on regulatory issues.
Binance and Zhao were charged Monday (June 5) with a variety of securities law violations, with SEC Chairman Gary Gensler accusing the company of spinning “an extensive web of deception, conflicts of interest, lack of disclosure and calculated evasion of the law.”
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