The US Securities and Exchange Commission (SEC) has launched an investigation into the US subsidiary of the world’s largest crypto exchange Binance and two trading companies linked to its founder. About this with reference to own sources reported Publication of the Wall Street Journal (WSJ).
We are talking about Sigma Chain AG and Merit Peak Ltd., which trade cryptocurrency assets and act as market makers on Binance.US, the American arm of Binance. A market maker is a company that assumes the risks of storing and transporting securities; In other words, it is a bidder with additional responsibilities, able to control the value of certain assets. According to information on the Binance.US official website, the crypto exchange may involve affiliated market makers in trading, but the companies themselves are not named. According to documents from 2019, both companies are linked to Binance owner and boss Changpeng Zhao, which was confirmed by the former bosses of these companies.
Market makers are a major force in securities trading. They smooth out price fluctuations by buying and selling assets during periods of market volatility. However, the SEC sanctions marketplaces that do not report the work of partners on the platforms. In 2015, this practice resulted in a $20 million fine for Investment Technology Group. To hold Binance liable, the SEC must prove it has jurisdiction over the cryptocurrencies offered by the platform. The agency tends to view them as securities, and industry officials strongly disagree. Binance even has its own BNB cryptocurrency, which was released in 2017. And the SEC, the WSJ clarifies, sometimes opens and closes investigations without filing charges or imposing penalties.
The agency sent inquiries to Binance back in late 2020. The commission was interested in the company’s owners, ways of making money on the platform, disclosure of information to the site’s customers, as well as the level of Binance.US’s dependence on the global stock market. In August last year, the head of the SEC compared the cryptocurrency market to the “wild west” and suggested expanding the agency’s powers to cryptocurrency platforms.