SEC Examines Links Between Binance’s Founder and Trading Firms

The Securities and Exchange Commission is looking into the relationship the U.S. arm of Binance has with two trading firms which have connections to Binance’s founder, The Wall Street Journal reported Tuesday (Feb. 15).

The two firms are Sigma Chain and Merit Peak and they are “market makers” which trade cryptocurrencies on Binance’s U.S. exchange.

Among other things, the regulators are looking into the way the Binance.US disclosed its links to the firms to customers. Binance.US says on its site that “affiliated market makers may trade on the exchange,” but reportedly, it doesn’t say which ones might be doing so.

In addition, there were also documents from 2019 tying Changpeng Zhao, the founder and CEO of Binance, to those firms. Former executives say Zhao controlled both firms as late as last year.

Binance spokesman Stephen Milton said it doesn’t have to disclose information about its investor or corporate structure.

The SEC has brought action against trading venues not disclosing their affiliations before — the main issue, according to finance professor James Angel, is, “Are you giving your affiliate some sort of unfair advantage? Do they get preferential access? Do they get to trade faster?”

Binance also recently said it was preparing to take deposits from the Single Euro Payments Area (SEPA), after a months-long freeze.

Read more: Binance Ending Halt on SEPA Payments

Transfers resumed around the end of January for customers in Belgium and Bulgaria, and other countries were set to follow. SEPA allows users to make cashless euro payments in the European Union, along with several other nations outside that.

Last July, Binance suspended the payments, saying it was because of events out of its control. Binance has been working alongside Paysafe to ensure the ability to offer SEPA payments for the foreseeable future, with digital wallets from Paysafe included.

The resuming of the SEPA payments is a boon for Binance, which has seen several scandals in recent years, such as one in which the Pakistan authorities were looking into a $100 million scam involving “11 mobile applications, 26 wallets and several thousand investors.”