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US SEC is Investigating Two Trading Firms with Links to Binance Founder

Legal

crypto-economy.com 16 February 2022 07:24, UTC
  
Reading time: ~2 m

The US SEC is investigating two trading firms that reportedly have connections with crypto exchange giant Binance US and its founder Changpeng Zhao.

According to a Tuesday, February 15th, report from the Wall Street Journal, people familiar with the matter has revealed that the US Securities and Exchange Commission (SEC) has launched a probe into crypto exchange Binance’s U.S. arm regarding two trading firms that reportedly have links to CZ.

SEC Investigates Sigma Chain and Merit Peak

The SEC investigation is looking at relationship between Changpeng Zhao (CZ) and two trading firms Sigma Chain AG and Merit Peak. Reports reveal that both Sigma Chain AG and Merit acted as a market maker and traded cryptocurrencies on Binance US regularly.

While no trusted information about Merit Peak is available on the web, Sigma Chain AG has its legal headquarters in Zug, Switzerland, and operates as Operation of investment companies.” The company is reported some working relations with some crypto companies and organizations such as the Ethereum Foundation and Tezos. The company was founded in February 2019, says a company listing website.

According to the WSJ report, corporate documents from 2019 as well as former Binance executives connect Zhao to both trading firms. He was president of Sigma Chain AG until September 2019. The company listing website lists two people, Markus Felix Spillmann and Guangying Chen, in the management team of Sigma Chain AG. Of these two people, Guangying Chen has also been listed on some Binance corporate documents as executive director. The sources further said that CZ remained effectively in control of Sigma Chain and Merit Peak as of last year.

The US SEC is interested in how Binance US and its affiliated trading firms operated. The authority has requested information about the two entities from Binance.US, is investigating how it may have disclosed its potential links to the market makers to users.

Binance US’ website notes that its affiliated market makers may trade on the exchange. Both firms serve as market makers for Binance US, bringing liquidity to the exchange to reduce price volatility. In this way, market makers buy and sell cryptocurrencies to make a profit on every trade. This is completely normal and the SEC investigation does not necessarily indicate wrongdoings.

Binance, the world’s largest spot cryptocurrency exchange by daily trading volume of more than $13 billion, is not new to these regulatory FUDs. The exchange has been under scrutiny from several regulatory authorities around the world.


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