FTC v. Binance: A Look Into Binance’s Proprietary Trading Activity on Binance

V. FACTS

C. Binance’s Proprietary Trading Activity on Binance

69. During the Relevant Period, Binance has traded on its own platform through approximately 300 “house accounts” that are all directly or indirectly owned by Zhao, as well as accounts owned by Merit Peak and Sigma Chain. Zhao has also traded on the Binance platform through two individual accounts.

At various times during the Relevant Period, Merit Peak has entered into OTC transactions with Binance customers (and settled such trades by depositing digital assets directly into its counterparties’ Binance accounts), while Sigma Chain has engaged in proprietary trading in Binance’s various markets, including its markets for digital asset derivatives.

On information and belief, Binance’s proprietary trading activity on Binance’s own markets is directed by Binance’s “quant desk.”

70. Binance does not disclose to its customers that Binance is trading in its own markets in its Terms of Use or elsewhere.

Consistent with its apparent attempt to keep its proprietary trading activity on its own markets top secret, Binance has refused to respond to Commission-issued investigative subpoenas seeking information concerning its proprietary trading activity on Binance, including transaction data and communications among the members of the Binance “quant desk.”

71. On information and belief, Binance has not subjected the trading activity of Merit Peak, Sigma Chain, or its approximately 300 house accounts to any anti-fraud or antimanipulation surveillanceor controls and to the extent Binance purports to have required its officers, employees, and agents to abide by a relatively new “insider trading” policy, Binance’s approximately 300 house accounts are exempt from that policy.