- The deposited capital was used for trading and personal enrichment of the CEO
- Also, part of the money served as collateral for BUSD
- Two private investment companies appear in the papers – Merit Peak and Key Vision Development Limited
Between 2019 and 2021, Binance and Binance.US diverted approximately $12 billion of escrowed funds to front companies controlled by CZ. This follows from the new materials submitted by the SEC to the court.
These papers are part of the process to freeze the assets of Changpeng Zhao and the US branch of the exchange. It is to them that the regulator refers, stating that client funds on the platform “need protection”.
According to the Securities and Exchange Commission (SEC), the company’s top management used corporate accounts with Silvergate Capital and Signature Bank to transfer funds.
Assets were transferred to shell companies in Lithuania, Kazakhstan and the Seychelles. As a result, most of them settled in Merit Peak. This is a private investment firm, which, apparently, made Zhao’s fortune, and at the expense of other people’s money.
A spokesman for the exchange denied the allegations. Binance says these international transfers are part of the company’s business practices.
According to other documents, Merit Peak also traded on Binance.US Platforms. At the same time, part of the money from the company’s accounts was redirected to Paxos, the issuer of BUSD.
Also in papers featured another name is Key Vision Development Limited. This firm was also involved in the redistribution scheme, but its role is still not completely clear. Recall that in an interview with Bloomberg, Gary Gensler said that he sees certain parallels between FTX and Binance. In particular, this is expressed in the organizational structure of companies. Allegedly, they both used portfolio and front organizations to redirect client funds.