Changpeng Zhao, CEO of Binance.
REUTERS/Darrin Zammit Lupi
- The SEC is looking into the relationship between Binance.US and two trading firms with ties to Binance founder Changpeng Zhao, The Wall Street Journal reported.
- The SEC requested information about Sigma Chain and Merit Peak, which act as market makers that trade crypto on Binance.US.
- Binance.US “is committed to upholding the highest standards of compliance,” a spokesman told WSJ.
The Securities and Exchange Commission is looking into the relationship between the US arm of Binance, the world’s largest cryptocurrency exchange, and two trading firms with ties to Binance founder Changpeng Zhao, The Wall Street Journal reported Tuesday.
Sigma Chain AG and Merit Peak Ltd. act as market makers that trade cryptocurrencies on the Binance.US exchange. One area of the investigation’s focus is how Binance.US disclosed to customers its links to the trading firms, the report said, citing unnamed sources familiar with the matter.
Market makers bolster liquidity and can add stability through constantly buying and selling assets. They profit from the small difference between the bid and offer price.
The WSJ report noted that Binance.US on its website says affiliated market makers may trade on the exchange, although it doesn’t publish names of which firms might do so.
The SEC has brought enforcement actions against trading firms that didn’t disclose trading by affiliates on their platforms.
The agency requested information about Sigma Chain and Merit Peak from Binance.US, which is the subject of an existing enforcement investigation, sources told the Journal. The agency at times starts and ends investigations without taking enforcement action or making allegations of wrongdoing.
Corporate documents from 2019 tie Binance founder and CEO Changpeng Zhao to Sigma Chain and Merit Peak, and former executives said that as of late 2021 Zhao controlled both entities.
The Journal said a spokesman for Binance.US, Zachary Tindall, declined to comment on the SEC investigation and any relationship with the two trading companies. “Binance.US is committed to upholding the highest standards of compliance,” he was quoted as saying.
The report said Binance spokesman Stephen Milton said Binance as a private company doesn’t need to disclose details of its investor or corporate structure but that information is shared with regulators when requested. Milton told the newspaper Zhao wasn’t available for comment.
The Journal has previously reported that Zhao is the majority owner of Binance and Binance.US.