The US Security and Exchange Commission SEC has launched an investigaton into giant crypto exchange Binance US division regarding trading firms connected to Binance CEO Changpeng Zhao CZ.
Sigma Chain AG and Merit Peak Ltd. act as market makers that trade cryptocurrencies on the Binance.US exchange. One area of the investigation’s focus is how Binance.US disclosed to customers its links to the trading firms, the report said, citing unnamed sources familiar with the matter.
Market makers bolster liquidity and can add stability through constantly buying and selling assets. They profit from the small difference between the bid and offer price.
The WSJ report noted that Binance.US on its website says affiliated market makers may trade on the exchange, although it doesn’t publish names of which firms might do so.
The SEC has brought enforcement actions against trading firms that didn’t disclose trading by affiliates on their platforms.
The agency requested information about Sigma Chain and Merit Peak from Binance.US, which is the subject of an existing enforcement investigation, sources told the Journal. The agency at times starts and ends investigations without taking enforcement action or making allegations of wrongdoing.
Corporate documents from 2019 tie Binance founder and CEO Changpeng Zhao to Sigma Chain and Merit Peak, and former executives said that as of late 2021 Zhao controlled both entities.
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