Key Points:
- Binance CEO CZ’s $250 million loan and its transfer to BAM Trading.
- SEC’s lawsuit against Binance, alleging violations of federal securities laws.
- Controversy surrounding Ceffu’s role in shifting US customer funds.
Recently unveiled court documents reveal that Binance CEO Changpeng ‘CZ’ Zhao received a $250 million loan from BAM Management U.S. Holdings, subsequently transferring the funds to BAM Trading.
In the wake of a substantial lawsuit filed by the SEC against Binance, the legal team representing Binance US responded to specific financial transaction inquiries posed by the regulator, as documented in court papers dated June 6.
Read Also: SEC’s Cryptocurrency Chief Warns of New Charges for Crypto Industry
One query from the SEC pertained to a $183 million transfer from Paxos Trust Company to BAM Trading, the entity operating as Binance US, in January. Paxos Trust, a fintech company, had partnered with Binance in 2019 to launch Binance USD (BUSD), a stablecoin ranking as the 28th largest digital asset by market capitalization. It halted BUSD minting in February following the SEC’s issuance of a Wells Notice to the company.
Both BAM Trading and BAM Management oversee Binance US, a cryptocurrency platform ostensibly distinct from the world’s largest digital asset exchange.
According to Binance US’s legal team, BAM Management US Holdings issued a $250 million convertible note to Zhao in December. Zhao utilized BUSD to finance the acquisition of this note, sending $183 million to Paxos Trust Company, the BUSD issuer, for conversion into USD. Subsequently, these funds were transferred to BAM Trading in January 2023.
Regulators have been scrutinizing Binance US, a platform that Binance claims operates independently, for some time.
The SEC, Wall Street’s primary regulator, alleges that the American firm has not cooperated with its investigation, while Binance US contends that the SEC’s demands are unreasonable.
In its lawsuit filed in June, the SEC accused Binance and its CEO of a ‘blatant disregard’ for federal securities laws and of ‘enriching themselves by billions of U.S. dollars while putting investor assets at significant risk.’
The SEC has expressed particular interest in Ceffu, an institutional crypto custodian partnered with Binance. The regulator believes Ceffu has served as a conduit between Binance US and Binance Holdings, facilitating the movement of US customer funds out of the United States.
In response, Zhao asserted on Twitter that ‘Binance US does not use, and has never used Ceffu or Binance Custody.’ However, other unsealed SEC documents today suggest that the American exchange ‘licensed custody software and support services from Ceffu,’ potentially contradicting Zhao’s statement.
For the record. Binance US does not use, and have NEVER used Ceffu or Binance Custody.
You can’t just make this stuff up. 🤷‍♂️ https://t.co/JIkIVTf8tc
— CZ 🔶 Binance (@cz_binance) September 19, 2023
Reports of enigmatic financial transfers are not unprecedented; in February, Reuters cited bank records and internal company messages, revealing that Binance US shifted $400 million from its platform to Merit Peak Ltd., a trading firm overseen by Binance CEO Changpeng Zhao.
The SEC had previously announced its investigation into the firm last year.
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