The U.S. Securities and Exchange Commission (SEC) has revealed new information about the crypto exchange Binance. According to the SEC, Binance utilized Signature Bank and Silvergate Bank to facilitate the movement of billions of dollars worldwide. The court filings exposed complex transactions involving Binance and its associated companies, with funds being transferred to accounts in various countries such as Kazakhstan, Lithuania, and the Seychelles.
Tax Avoidance
On Monday, the SEC filed a lawsuit against Binance, alleging mishandling of customer funds, deceptive practices towards regulators and investors, and engagement in manipulative trading. The regulators have requested a temporary freeze of assets tied to Binance‘s U.S. subsidiary. The SEC has also sued Binance’s founder and CEO, Changpeng Zhao (CZ), claiming that he orchestrated the transfer of billions of dollars to an offshore entity under his control.
The SEC estimated that Binance owed over $13 million in unpaid taxes from the past four years, including an interest penalty. However, the regulatory body did not disclose the exact amount of taxes paid by the company during that period or the amount it should have paid.
Money-Laundering Allegations
Although the filings did not explicitly explain the motive behind Binance‘s money transfers, anti-money laundering experts argue that the large and rapid transfers should have raised suspicions among bankers.
Banks must report any suspicious transactions that could involve money laundering or fraud through a suspicious activity report (SAR). While it is unclear whether Silvergate or Signature reported Binance‘s activities, both banks allowed customers invested in digital currencies to transfer funds quickly worldwide in U.S. dollars, filling a niche in serving the crypto trading market.
A spokesperson for Binance stated that the transactions mentioned in the filings did not involve customer funds and were conducted as part of the company’s regular business operations. Binance denies any wrongdoing and vows to defend itself against the SEC’s allegations vigorously.
Silvergate voluntarily liquidated itself in March after suffering significant losses from cryptocurrency customers. Some of Binance‘s accounts were closed by Silvergate in 2021 and 2022. The Federal Deposit Insurance Corporation and the New York State Department of Financial Services took over New York-based Signature Bank in March. The collapse of Signature Bank was attributed to a run on the bank by uninsured depositors and was not specifically linked to its dealings with Binance.
