Despite claims the companies are separate, cryptocurrency giant Binance reportedly controlled accounts at its American affiliate.
That’s according to a Monday (June 5) report by Reuters, citing bank records that show senior executive Guangying Chen controlled five bank accounts belonging to Binance.US, including one containing American customers’ funds.
The report says records show that Silvergate Bank authorized Chen, a close associate of Binance CEO Changpeng Zhao, to manage the accounts in 2019 and 2020, allowing Chen and her subordinates to transfer funds held in those accounts. Company messages show that Binance.US even needed to ask Chen to process payments, including to cover payroll.
The allegations are the latest in a series of reports that suggest Binance’s control over its U.S. offshoot, in spite of claims by both companies that they are independent entities.
According to the report, Binance.US’s head of legal Krishna Juvvadi told Reuters in April that employees of Binance.US’s operator, BAM Trading, had “exclusive control” since the company was founded in 2019.
But when questioned for the most recent report, Binance.US spokesperson, Christian Hertenstein, said that “no one other than Binance.US officials have had control or access to Binance.US accounts” since CEO Brian Shroder took over in late 2021.
Reuters said Hertenstein did not explain the discrepancy in the time periods provided by him and Juvvadi. PYMNTS has contacted Binance.US for comment but has not yet gotten a reply.
The news follows reports from March that claim Binance created Binance.US as a shield from regulators in America.
It’s also part of a string of bad news for the world’s largest cryptocurrency exchange, which last month found itself defending itself following a report that it had commingled billions in customer funds with its own money.
Binance has also been the subject of legal action by U.S. law enforcement and regulatory agencies. For example, the Commodity Futures Trading Commission (CFTC) sued the company in March for operating illegally in the U.S., though Binance has maintained that it does not serve American customers.
Meanwhile, Eun Young Choi, head of the Department of Justice’s (DOJ) National Cryptocurrency Enforcement Team (NCET), said last month that she plans to crack down on unlawful activity in the crypto sector, particularly companies that commit crimes or allow them to happen following a “significant” growth in illicit activities in the digital asset space.
Industry observers have argued that a prosecution of Binance or Zhao could further destabilize the crypto industry, but Choi told the Financial Times that the size of a company “is not something that the department will countenance” while considering charges.
If a crypto exchange “has amassed a significant market share in part because they’re flaunting U.S. criminal law,” the government cannot “be in a position where we give someone a pass because they’re saying ‘Well, now we’ve grown to be too big to fail,’” Choi said, without mentioning any companies by name.