According to Wall Street Journal, the Securities Exchange Commission (SEC) is probing two trading firms affiliated with ‘Binance.us’. Moreover, the names of these firms are Sigma Chain AG and Merit Peak Ltd.
The CEO of Binance, Changpeng Zhao, has connections with these firms. Moreover, corporate documents suggest that Zhao controlled the firms till last year. Furthermore, the SEC has requested Binance to disclose information related to the firms.
SEC Probe Marks Third Run-In Of Binance With Regulators
Binance is the largest crypto exchange platform globally regarding the daily trading volume. Due to regulatory issues, Binance formed Binance.us for its American users as they could not access the leading exchange platform.
This is not the first time Binance has run into trouble with regulators. In May 2021, the Department of Justice and the Internal Revenue Service investigated Binance. According to the regulators, investors used Binance for money-laundering and tax fraud purposes. Additionally, in September 2021, the Commodity Future Trading Commission was looking at the activity of Binance employees. Accordingly, the Commission investigated claims of market manipulation and insider trading by Binance employees.
The SEC investigation will mark the third instance of Binance’s entanglement with regulators.
What Is The SEC Investigating Binance.us for?
According to the report by Wall Street Journal, the SEC is looking into the relationship of Binance with the two trading firms. The regulator checks how Binance.US informed its customers about its links to Sigma Chain AG and Merit Peak Ltd.
Moreover, both trading firms are market makers on Binance. U.S. Additionally, market makers, are firms, institutions, or individuals of an exchange that buy and sell securities to maintain liquidity. This means that market makers ensure that the volume of trading is high enough to ensure smooth market functioning.
As per the report, the website says that market makers can trade on the exchange. However, the platform has not released the names of those firms. Moreover, Binance, in its statement to WSJ, says that it is under no compulsion to disclose its corporate structure to the public. However, if asked, the exchange will provide the required information to regulators.
The U.S. Securities and Exchange Commission has recently bought enforcement actions against crypto firms that do not disclose trading by affiliates on their platform. However, it is unclear how the SEC will proceed with the investigation. Sometimes the authority starts and ends investigations without taking enforcement actions or pressing charges.