Global cryptocurrency exchange Binance had secret access to a bank account belonging to its purportedly independent US partner and transferred large sums of money from the account to a trading firm managed by Binance CEO Changpeng (CZ) Zhao, banking records and company messages show, Angus Berwick and Tom Wilson reported for Reuters.
Photo Insert: The Binance global exchange, Binance CEO Zhao and Prime Trust did not respond to detailed questions about the transfers.
Over the first three months of 2021, more than $400 million flowed from the Binance.US account at California-based Silvergate Bank to this trading firm, Merit Peak Ltd, according to records for the quarter, which were reviewed by Reuters.
The Binance.US account was registered under the name of BAM Trading, the US exchange's operating company, according to the records. Company messages show the transfers to Merit Peak began in late 2020.
Prime Trust made $650 million in wire transfer deposits into the Binance.US account during the quarter, the bank records show.
A Binance.US spokesperson, Kimberly Soward, did not address Reuters' questions about the transfers detailed in the bank records. In a statement, she said Reuters' reporting used "outdated information" without elaborating further.
She added: "Merit Peak is neither trading nor providing any kind of services on the Binance.US platform" and "only Binance.US employees have access" to the bank accounts of the US company. Soward didn't specify when Merit Peak's activities ceased.
The Binance global exchange, Binance CEO Zhao and Prime Trust did not respond to detailed questions about the transfers. A Silvergate spokesperson said the bank does not comment on individual customers.
Binance.US's executives were concerned by the outflows because the transfers were taking place without their knowledge, according to messages reviewed by Reuters.
The CEO of Binance.US at the time, Catherine Coley, wrote to a Binance finance executive in late 2020 asking for an explanation for the transfers, calling them "unexpected" and saying no one mentioned them.
"Where are those funds coming from?" she wrote in one message. In a response to Coley, seen by Reuters, the Binance executive, Susan Li, did not explain the transfers. Li wrote that Merit Peak was a "vendor that facilitated trading" on Binance.US and also provided loans and capital injections to the American exchange.