Binance CEO Changpeng ‘CZ’ Zhao received a $250 million loan from BAM Management U.S. Holdings, only to transfer it to BAM Trading, according to court documents unsealed this week.
One day after the SEC hit Binance with a massive lawsuit, the Binance US legal team filed responses to questions from the regulator about specific financial manouevers, according to unsealed June 6 court documents.
One of the questions from the regulator related to a $183 million transfer from Paxos Trust Company to BAM Trading—the company that does business as Binance US—in January.
Paxos Trust is a fintech company that partnered with Binance in 2019 to launch Binance USD (BUSD), a stablecoin and the 28th biggest digital asset by market capitalization. It stopped minting BUSD in February after the SEC hit the company with a Wells Notice.
Both BAM Trading and BAM Management operate Binance US, a crypto platform that is ostensibly run separately from the world’s biggest digital asset exchange.
Binance US’s legal team claimed in the documents that BAM Management US Holdings issued a $250 million convertible note to Zhao in December. Zhao “funded the purchase of this note with BUSD, $183 million of which was sent to Paxos Trust Company, as issuer of BUSD, to convert the BUSD into USD,” it said.
It added that “these funds were then transferred to BAM Trading in January 2023.”
Regulators have been eyeing up Binance US—which Binance claims is run completely independently—for some time now.
Wall Street’s biggest regulator claims that the American company has not cooperated with its investigation. Meanwhile, Binance US has repeatedly said the SEC’s demands are unreasonable.
The SEC’s lawsuit in June alleged that Binance and its boss had a “blatant disregard” of federal securities laws and “enriched themselves by billions of U.S. dollars while placing investors’ assets at significant risk.”
And the SEC is particularly interested in Ceffu, the institutional crypto custodian and partner of Binance. The regulator believes Ceffu has been acting as a conduit between Binance US and Binance Holdings and has been used to shift US customer funds out of the U.S.
Zhao said on Twitter today that “Binance US does not use, and have never used Ceffu or Binance Custody.”
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
But other SEC documents unsealed today show that the American exchange “licensed custody software and support services from Ceffu”—apparently contradicting Zhao’s claim.
Mysterious money movements are reportedly not new: Binance US moved $400 million from its platform to Merit Peak Ltd., a trading firm managed by Binance CEO Changpeng Zhao, Reuters reported back in February, citing bank records and internal company messages.
The SEC said last year that it was investigating the firm.