Binance.US, the United States arm of Binance Exchange is currently under investigation by the U.S. Securities and Exchange Commission (SEC). As reported by the Wall Street Journal (WSJ), the probe is connected with the platform’s affiliation to market makers Merit Peak Ltd and Sigma Chain AG.
Market makers play a crucial role in the Bitcoin (BTC) and crypto trading industry. With the instabilities in the blockchain space, they help to smooth out price variations by constantly buying and selling. They are compensated by taking a tiny cut of the difference between the bid and the offer price.
The two trading companies linked with the investigation are both market makers that trade crypto on the platform of Binance U.S, which has become a major concern for the SEC.
As far back as 2019, documents reveal that the CEO of Binance and Binance.US, Changpeng Zhao (CZ) is closely linked with the two cryptocurrency trading firms. As a matter of fact, he was former chairman, board of directors of Sigma.
According to the report, it was also gathered from former executives of Binance that the trading firms under investigation began crypto trading on the platform of Binance.US immediately the exchange began business operations in 2019. There were concerns from the legal and compliance department of Binance U.S. as to where Sigma Chain AG and Merit Peak were getting their funding to trade in such a short time.
As gathered from the former executives, Sigma completed all orders on Binance.US in which users buy or sell a cryptocurrency at the current market price. Merit Peak Ltd, as well as other market makers, only traded orders that would only yield a profit if the price of a cryptocurrency increased to a specific level.
With these allegations of probe from the authorities, spokespersons from both Binance and Binance.US entities are yet to issue any official statements as to validating or denying the claims of SEC.
Earlier in 2021, Binance was also under scrutiny by the Internal Revenue Service (IRS) and Department of Justice both of the United States for allegedly aiding its citizens in using cryptocurrency to break the law. Despite the upset, the Binance exchange has maintained its dominance in the ecosystem in terms of daily trading volume to date.