The Securities and Exchange Commission (SEC) is investigating the relationship between the US arm of cryptocurrency exchange Binance and two trading companies associated with Binance CEO Changpeng Zhao, as reported by De Waall Street Journal† The two companies, Merit Peak Ltd. and Sigma Chain AG, act as market makers that continuously buy and sell crypto on Binance.US, helping to reduce price volatility.
The SEC is particularly concerned about how Binance is disclosing its ties to the two trading firms, WSJ reports. On the Binance.US website, the crypto exchange tells users that affiliated market makers can trade on the platform. However, it does not name specific companies.
The SEC has asked Binance.US for more information about both companies. According to the WSJ, company documents from 2019 point to a link between Zhao and the two companies. Former executives also say Zhao began controlling both companies last year.
Binance established its separate Binance.US branch in 2019 to comply with US regulations. The Internal Revenue Service and the Department of Justice opened an investigation into the Cayman Islands-based company last year, with officials specializing in money laundering and tax crimes investigating the case. Last September, the investigations were expanded with the Commodity Futures Trading Commission to investigate possible insider trading and market manipulation. Investigations are still ongoing.