March 28, 2024
Policy & Regulation

Binance CEO CZ Obtained $250 Million Loan and Transfer to BAM Trading Revealed in Court Records

According to court records that were released this week, Binance CEO Changpeng ‘CZ’ Zhao obtained a $250 million loan from BAM Management U.S. Holdings and then transferred it to BAM Trading.

Unsealed court filings from June 6 show that the Binance US lawyers sent responses to the SEC’s inquiries concerning particular financial manoeuvres the day after the regulator slammed Binance with a significant lawsuit.

One of the inquiries from the SEC concerned a $183 million transfer made in January from Paxos Trust Company to BAM Trading, the firm that operates as Binance US.

Binance USD (BUSD), a stablecoin and the 28th largest digital asset by market capitalization was introduced in 2019 as a result of a partnership between Paxos Trust, a fintech company, and Binance. After receiving a Wells Notice from the SEC, the business halted minting BUSD in February.

Binance US, a cryptocurrency platform that is purportedly administered separately from the biggest digital asset exchange in the world, is run by BAM Trading and BAM Management.

In the documents, Binance US’s legal team asserted that BAM Management US Holdings had given Zhao a $250 million convertible note in December. Zhao “funded the purchase of this note with BUSD, of which $183 million was sent to Paxos Trust Company, as the issuer of BUSD, to convert the BUSD into USD,” it stated.

This was followed by the statement, “These funds were then transferred to BAM Trading in January 2023.”

Regulators have been keeping a close eye on Binance US, which Binance insists is handled entirely autonomously.

The American corporation, according to Wall Street’s top watchdog, has not cooperated with its inquiry. Meanwhile, Binance US has argued that the SEC’s demands are unjustified on several occasions.

In a lawsuit filed in June, the SEC said that Binance and its CEO had “blatantly disregarded” federal securities laws and “enriched themselves by billions of U.S. dollars while placing investors’ assets at significant risk.”

Additionally, Ceffu, a partner of Binance and an institutional cryptocurrency custodian, is of particular interest to the SEC. The commission thinks Ceffu was utilized to transfer US customer cash out of the country by serving as an intermediary between Binance US and Binance Holdings.

“Binance US does not use and has never used Ceffu or Binance Custody,” Zhao stated today on Twitter.

However, other SEC records that were recently declassified reveal that the American exchange “licensed custody software and support services from Ceffu”—apparently in direct opposition to Zhao’s assertion.

Mysterious financial transactions are nothing new. Reuters reported in February that Binance US transferred $400 million from its platform to Merit Peak Ltd., a trading company run by Binance CEO Changpeng Zhao. The report was based on bank records and internal corporate communications.

The SEC announced that it was looking into the company last year.

Image: Flickr

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