As the legal battle with the Securities and Exchange Commission (SEC) unfolds, details of Binance US’s revenue, profits, and unpaid taxes are now under the microscope. Binance US, helmed by majority owner and CEO Changpeng Zhao (known as CZ), allegedly amassed $216 million from equity sales, according to an SEC declaration. Consequently, Binance US finds itself facing a potential Internal Revenue Service (IRS) penalty amounting to a staggering $15 million.
The declaration further claims that Binance US garnered a total revenue of about $411 million, with a gross profit estimated at $224 million. This lofty income stream has potentially triggered another IRS penalty for underpayment, amounting to an additional $13 million.
Audit Reports Highlight Complex Financial Relations
Audit reports from Armamino LLP, previously Binance’s auditor, furnish further insights. The company had overseen the custody of Binance’s cryptocurrency assets and transactions between Binance and its US counterpart. This partnership involved several agreements, all intricately defining the association between Binance and Binance US. The former had direct control over the exchange software and custody of the cryptocurrency assets.
FGMK, another auditor, disclosed a loan of about $26 million in cryptocurrency from Binance to its US counterpart in September 2022, repaid in full by October 2022.
Tangled Transactions and Lavish Expenditures Revealed
The SEC declaration also outlines puzzling transactions within Binance and Binance US’s bank accounts, controlled by different CZ-led entities. An alleged intermingling of funds has been suggested, casting shadows on CZ’s financial conduct.
Notably, Sigma Chain AG, a CZ-led market maker, reportedly facilitated $32 million in withdrawals to Guangying Chen via a Silvergate Bank account. Another $11 million was withdrawn towards Simpson Marine, a luxury yacht seller based in Hong Kong.
Moreover, a Signature Bank account linked to Binance Capital Management Company Limited showcased hefty withdrawals. CZ allegedly withdrew $62.5 million for personal use and another $55 million to INSURED AIRCRAFT TITLE SERVICE LLC, a private aircraft title and escrow firm based in Oklahoma.
This pair of declarations forms just a fraction of the slew of evidence submitted as the SEC intensifies its case against Binance and CZ. These allegations and the ongoing investigation may deeply impact the future of Binance and the broader cryptocurrency market.
