Binance, the world’s largest cryptocurrency exchange by volume, is under investigation by US financial regulator, the Securities and Exchange Commision (SEC). The exchange could pay monetary penalties and settle existing investigations on its US business.
US financial regulators recently tightened their grip on the crypto market, slapping firms like Kraken and Paxos with investigations.
SEC is closely investigating the relationship between the US arms of Binance and two trading firms with ties to founder Changpeng Zhao. Sigma Chain AG and Merit Peak Ltd. are the two market makers on Binance’s US exchange and the regulator is examining the exchange’s disclosures to customers about its relationship with trading firms.
Binance.US website says that affiliated market makers may trade on its platform, however it doesn’t name the firms. The SEC requested the exchange for more information on the two market makers, considered affiliates of the exchange’s US business.
CZ was listed as the chairman of the board of directors of Sigma in a Swiss incorporation document from January 2019. Further, CZ signed a document on behalf of market maker Merit, approving an infusion of capital into Binance.US in exchange for shares in the company.
Binance, meanwhile, expects to pay monetary penalties to effectively settle and put to an end existing US regulatory and law-enforcement investigations into its businesses. The firm’s Chief Strategy Officer Patrick Hillman said that the exchange is working with regulators to reach a settlement figure.
The popular crypto exchange expects the outcome to be a fine most likely, or perhaps more, and that remains for regulators to decide.