Binance Used FTX-Like Web Of Firms To Dodge Regulations, US SEC Lawsuit Reveals

The US Securities and Exchange Commission has made some serious allegations against Binance empire and its founder Changpeng Zhao. US SEC cited Binance CCO admitting that they are operating as an unlicensed securities exchange in the USA.

The main allegation by SEC against Binance and CZ is that they knowingly operated as an illegal, unregistered US Securities business, evading investor and market protections laws.

US SEC chief Gary Gensler tweeted that Zhao and Binance entities allegedly engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.

“A web of deceptions”

US SEC alleged in its lawsuit that as a part of a plan to evade US regulatory oversight over Zhao, Binance, Binance.com platform, Zhao and Binance created BAM Management and BAM Trading in the United States and claimed publicly that these entities independently controlled the operations of the Binance.US platform. But CZ and Binance were controlling BAM Trading’s US business operations and maintaining the crypto asset services of the Binance.US platform.

The lawsuit further says BAM Trading employees referred to Zhao’s and Binance’s control of BAM Trading’s operations as “shackles.” In 2020, BAM Trading’s then-CEO told Binance CFO that her “entire team feels like it had been duped into being a puppet.” CZ directly owns 81% of BAM US.

Another Zhao’s firm that the SEC highlighted in its lawsuit is Merit Peak Limited, a crypto asset trading firm incorporated in the British Virgin Islands. Zhao is Merit Peak’s beneficial owner and several Binance employees conducted its operations. It has described itself as “a proprietary firm trading with our owner’s [Zhao’s] self-made wealth from the digital asset business.”

The lawsuit claims Zhao directed over $16 million to BAM Management to fund the Binance.US Platform’s operations through Merit Peak.

Eerily similar to FTX?

As the US SEC sheds a light on Binance empire’s operations, the scenes behind the covers.look a lot like what transpired at now defunct FTX exchange. Like Sam Bankman-Fried operated Alameda research as a prop trading and market-making entity, CZ controlled BAM Management, Sigma Chain, and Merit Peak. BAM Management US Holdings Inc, which is different from BAM Holdings Limited, was capitalized in part by US investors. With all the allegations coming to light, Binance seems to be in serious trouble. If charges are proved, Binance will be subjected to sanctions and heavy penalties that will leave CZ’s empire crumbling.

Read More: US SEC Sues Coinbase Exchange Following Binance Lawsuit