The labyrinthine relationship between the colossal cryptocurrency exchange, Binance, and its ostensibly separate U.S. affiliate, Binance.US, has come under renewed scrutiny, with new evidence demonstrating the tight control the crypto exchange has exerted over its U.S. counterpart.
Banking documents from 2019 and 2020 indicate that a senior executive from Binance, Guangying Chen, wielded authority over the financial activities of Binance.US, adding a new layer of complexity to an already intricate relationship between the two entities.
Inside the power dynamics
Chen, a close associate of Binance CEO Changpeng Zhao, was authorized by U.S. lender Silvergate Bank to operate five bank accounts linked to Binance.US.
This authorization enabled her, along with her deputies, to transfer funds within these accounts, while Binance.US employees had to petition Chen’s team for the processing of payments, including payroll.
This revelation underscores the extent of the financial dominion Binance held over its American affiliate, raising questions about the alleged independence of the latter.
Despite these findings, Binance.US, under its operator BAM Trading, has consistently maintained its operational autonomy.
The official position, as stated by Binance.US spokesperson, Christian Hertenstein, and the company’s head of legal, Krishna Juvvadi, asserts that since late 2021, only Binance.US officials have had control or access to the company’s accounts.
As this control drama unfolds, Binance’s U.S. activities are under the keen watch of Washington. The U.S. Commodity Futures Trading Commission has leveled charges against the company and Zhao, accusing them of evading commodity laws deliberately by creating entities designed to sidestep U.S. regulations aimed at safeguarding investors.
Binance has dismissed these charges, while the CFTC remains silent. The veil of secrecy over Binance.US’s finances has allowed Zhao to steer the company’s expansion in the booming American crypto market while maintaining a careful separation from his global exchange, which faces regulatory scrutiny in the United States.
Intricate Binance’s financial maneuvers
Upon closer inspection, Binance’s influence over its U.S. affiliate extends far beyond the operations of Binance.US. Documents show that Chen signed further agreements with Silvergate Bank to act as the “Primary Admin User” for multiple bank accounts.
However, despite these connections, Catherine Coley, Binance.US’s chief executive at the time, and her finance team only had view-access, leaving them without ultimate control over the company’s finances.
The previously undisclosed bank records also reveal that over $400 million was transferred from a Binance.US Silvergate account, controlled by a Chen’s deputy, to a trading firm controlled by Zhao.
Binance.US has asserted that the funds belonged to the trading firm, Merit Peak, and came from its trading activity on the exchange.
Binance.US now faces the task of addressing these newfound revelations, as well as assuaging any concerns about Chen’s role and the extent of her control. Binance.US has yet to respond to these questions, pointing to the complete change in management since the time period in question.
As regulators keep a watchful eye, the dealings of Binance and Binance.US continue to evolve into an intricate tapestry of intertwined relationships and strategic maneuvers.