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Billions of dollars of Binance-related funds routinely flowed through Signature Bank and Silvergate Bank for years, according to court documents filed Wednesday on behalf of the Securities and Exchange Commission (SEC).
The two institutions catered heavily to crypto clients before they shuttered in March. And each bank operated its own round-the-clock payments network, which allowed customers to settle digital asset transactions.
An SEC review of financial records, including bank statements and wire transfers, found Binance, CEO Changpeng Zhao, and BAM Trading Services—the operator of Binance.US—held numerous accounts at Signature and Silvergate banks.
While Binance has said that it and Binance.US are separate entities, the SEC’s lawsuit unveiled on Monday calls that into question. And to bolster its emergency motion seeking to freeze Binance.US’s corporate assets, the SEC’s account of financial records indicates BAM Trading Services and Binance entities deposited billions of dollars into a single account that belonged to Merit Peak, of which Zhao is the beneficial owner.
Binance’s Silvergate Bank Accounts
Attached to an email address identified as “Solutions@Binance.com,” Merit Peak’s Silvergate Bank accounts received $22.2 billion in deposits between 2019 and 2021, the SEC claims. Of that, $21.9 billion was paid to a foreign affiliate of Paxos, the former issuer of BUSD. The New York firm stopped minting the Binance-branded stablecoin in February at the direction of regulators.
Merit Peak is described as an over-the-counter trading desk and a proprietary trader of digital assets, according to the filing, which notes Silvergate closed the company’s accounts in mid-2022. But the accounts contained commingled assets, the SEC claims.
“Millions of dollars from Binance-related accounts were commingled in Merit Peak’s accounts,” the documents state. “Merit Peak transferred all of that money as part of its transfers of almost $20 billion to a foreign affiliate of Paxos in 2021.”
Another company beneficially owned by Zhao called Sigma Chain received funds from Binance and BAM Trading Services, the SEC claims. Between 2019 and 2023, Sigma Chain received $184 million and $145 million from Binance and BAM Trading Services, respectively.
The company’s business was described as a “market maker providing liquidity to fiat exchanges,” according to the filing. The SEC claims that Sigma Chain “engaged in manipulative trading that artificially inflated [...] trading volume” on Binance.US.
BAM Trading Services received deposits from other players in the digital assets industry between 2019 and 2013: Cryptocurrency exchange Coinbase ($424 million), the trading firm Wintermute ($2.4 billion), and Alameda Research ($318 million), the trading firm of FTX founder and former CEO Sam Bankman-Fried.
BAM Trading Services sent $1.5 billion to Alameda Research and $3.3 billion to Wintermute during that period, the SEC claims.
Neither Wintermute nor Coinbase immediately responded to a request for comment from Decrypt.
In total, eight Binance-affiliated companies held accounts at Silvergate Bank, which were incorporated in Seychelles, the British Virgin Islands, Switzerland, and the state of Delaware. According to the filing, Guangying Chen, a senior executive at Binance, controlled accounts belonging to both BAM Trading Services and Binance.
As of March 31, all of the bank accounts tied to Binance, BAM Trading Services, and Zhao were empty, the SEC allegedly found. The bank had signaled it would voluntarily wind down operations earlier that month.
Binance’s Signature Bank Accounts
Numerous bank accounts associated with the aforementioned entities were also opened at Signature Bank, the crypto-friendly bank that was seized by regulators in March alongside Silicon Valley Bank. Other foreign companies where Zhao was also a beneficial owner had accounts as well, the documents state.
“Zhao was also the beneficial owner of numerous other foreign companies with accounts at Signature Bank,” the court documents state. “These companies are foreign domiciled, including in Canada, UAE, Seychelles, Singapore, Lithuania, Kazakhstan, among others.”
Between Binance-linked bank accounts at Silvergate Bank and Signature Bank, “large amounts of money [flowed] in and out,” where incoming funds were followed by debits within days, the SEC claims. “At times the amounts being credited and debited during a single month amounts to the movement of more than a billion dollars,” it adds.
When this year began, the SEC found that eight companies owned by Binance and Zhao had a total of $58 million on deposit. The filing states, “During that same time frame, $840 million was deposited into, and $899 million was withdrawn, from those accounts.”
By the end of March, the eight accounts were empty, except for one that had $180,000. And as of May 27, long after Signature and Silvergate had closed up shop, the SEC claims all of the accounts were either empty or closed.
On Tuesday, the SEC filed an emergency motion, seeking a temporary restraining order against Binance.US that would freeze the company’s corporate assets. It also requested that funds, both crypto and cash, be repatriated to the United States.
A Binance spokesperson told Decrypt the measure is “unwarranted and based more on the SEC Staff obtaining an advantage in litigation versus genuine concern about the safety of customer assets.”
“While we are disappointed by this action, we look forward to defending ourselves in court,” the spokesperson added.