Major crypto exchange Binance’s U.S.-based subsidiary moved a significant amount of funds to a trading firm with ties to its founder Changpeng Zhao.
According to a Thursday report from Reuters, Binance U.S moved $400 million from its account with Silvergate Bank to a trading firm called Merit Peak in the first three months of 2021.
The transfers took place on Silvergate Exchange Network (SEN), which facilitates high value transactions for institutional investors. At the time of writing, the reasons for these transfers could not be determined.
The crypto exchange’s account with Silvergate was registered in the name of its operating company BAM Trading. Merit Peak is a trading firm managed by Binance CEO Changpeng Zhao, incorporated in the British Virgin Islands in January 2019. Documents reviewed by Reuters show that Zhao signed a $1 million purchase agreement for Merit Peak to invest in BAM Trading for a portion of its preferred shares.
Merit Peak is also among the firms that are being investigated by the U.S. Securities and Exchange Commission, over its role as a market maker to Binance US, the Wall Street Journal reported earlier this week.
A spokesperson for Binance US told Reuters that the information used in the report was “outdated,” and did not comment on the transfers made from Silvergate. However, Reuters found that several Binance US executives were concerned by the outflows, of which they had no knowledge.
When former Binance US CEO Catherine Coley questioned the transfers, and where the funds were coming from, a Binance executive responded that Merit Peak was a vendor that facilitated trading, also providing loans and capital injections to the exchange.
On Wednesday, Binance’s chief strategy officer said the exchange expects to pay monetary penalties to settle with U.S. investigators who are looking into its business. The U.S. Department of Justice (DOJ) and the Commodity Futures Trading Commission (CFTC) are said to be investigating Binance.
Separately, Silvergate is being questioned by U.S. Senators on its dealings with FTX. Earlier this month, Bloomberg reported that Silvergate had been “evasive” in its response to a previous inquiry.