Reuters, an international news service with more than 2,500 journalists and 600 photographers in nearly 200 countries, discovered that Binance sent $400 million worth of funds from Binance.US to investment firm Merit Peak in the first months of 2021. It is striking that Binance CEO Changpeng Zhao is on paper the manager of Merit Peak. Are we dealing with a new FTX-like scandal here?
FTX-like practices
You may have noticed that FTX went bankrupt last year because, among other things, it invested customer funds through Alameda Research, a trading firm of FTX founder Sam Bankman-Fried. Now, according to Reuters, research reports show that Binance sent over $400 million from Binance.US to Merit Peak in the first three months of 2021.
Reuters could not discover the exact reason for those transactions. It is also not clear at this time whether it concerns customer credits. Binance.US terms of use state that customer funds are held with Silvergate and Prime Trust.
Notably, Prime Trust transferred approximately $650 million in capital to Binance.US’s account during that quarter. It is to be hoped that Binance does not follow the same practices as FTX here, because that would create a huge drama for the industry.
No comment
To further investigate the matter, Reuters attempted to contact Binance. Finally, Reuters managed to ask some questions to Kimberly Soward, a spokesperson for Binance.US, who unfortunately declined to comment on the specific transactions. All she wanted to say was that Reuters based this on “outdated information” without explaining it further.
“Merit Peak does not trade on the Binance.US platform nor offer any other services on that platform. Only Binance.US employees have access to the trading platform’s bank accounts,” Soward added.
What makes the case particularly striking is that Binance.US executives were concerned about the outflows, according to Reuters information. They were completely unaware of these transactions. If that information is correct, this could be a huge problem for Binance.