SEC Begins Investigating Binance Citing Relationship With Market Makers

Binance is once again the subject of regulatory scrutiny. The global exchange’s US affiliate, Binance.US, is being investigated by the SEC according to a report. The SEC is looking into Binance.US’ relationship with two trading firms that act as market makers.

Binance.US under probe from the SEC

The Wall Street Journal (WSJ) reports that sources close to the issue say the SEC is concerned about the crypto exchange’s disclosure of its relationship with the firms to customers.

The two firms, Sigma Chain AG and Merit Peak Ltd., are owned by Binance’s founder Changpeng Zhao as corporate documents and former executives say.

The SEC’s investigation is looking into whether the trading firms get preferential treatment as market makers that trade cryptocurrencies on the exchange. Binance.US’ website explains that affiliated market makers can trade on the platform.

A Binance.US spokesperson, citing FTX’s relationship with the Sam Bankman-Fried owned Alameda Research, explains that there is no wrongdoing in having market makers trade on exchanges in both traditional finance and crypto.

 Market-making activities are standard in both traditional finance and crypto…They ensure liquidity and directly support a healthy, vibrant, and efficient marketplace to the benefit of end-users, the spokesperson said.

Binance has previously come under regulatory scrutiny in the US. Last year, the Commodity Futures Trading Commission (CFTC) opened investigations into Binance with concerns over unlawful derivatives trading.

Earlier, the Department of Justice (DOJ) and the Internal Revenue Service (IRS) also investigated the exchange on concerns of facilitation of illicit transactions. Binance CEO Changpeng Zhao has denied any allegations of misconduct at the exchange.

SEC enforcement actions are still facing criticisms

The SEC is going all out in regulating its regulatory efforts in the crypto industry. In an enforcement action last week, crypto lending platform, BlockFi, reached an agreement to pay $100 million as settlement to the SEC and other state regulators.

The SEC also has its sights set on other crypto lending platforms and exchanges including Gemini, and Celcius.

However, the SEC is still receiving pushback for its multiple enforcement actions targeted at the crypto industry. One vocal critic of the security regulator has been one of its commissioners, Hester Pierce.

Pierce has called out the SEC over the settlement agreement it reached with BlockFi, stating that the settlement did not bring regulatory clarity and was not to the advantage of the platform.


The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.

About Author