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The Securities and Exchange Commission is looking into the relationship between the US arm of Binance, the largest cryptocurrency exchange globally, and two trading firms with ties to Binance founder Changpeng Zhao, according to a report by The Wall Street Journal Tuesday. 

Merit Peak Ltd. and Sigma Chain AG  are market makers that trade cryptocurrencies on the Binance U.S. exchange. The SEC is investigating links between trading firms and the exchange, the report said, citing unnamed sources familiar with the matter. 

Market makers strengthen liquidity and add stability by constantly buying and selling assets. They make a profit from the small difference between the bid and offer price.

The Wall Street Journal report stated that Binance says on its website that it is affiliated market makers can trade on the exchange. However, the platform doesn’t disclose which firms are doing it.

The SEC has brought enforcement actions against trading firms that didn't disclose trading by affiliates on their platforms.

According to corporate documents from 2019, there is a tie between Binance founder and CEO Changpeng Zhao to Sigma Chain and Merit Peak. Former executives said that Zhao controlled both entities as of late 2021.

The Journal said a spokesman for Binance.US, Zachary Tindall, declined to comment on the SEC investigation and any relationship with the two trading companies. "Binance.US is committed to upholding the highest standards of compliance," he was quoted as saying. 

The report said Binance spokesman Stephen Milton said Binance as a private company doesn't need to disclose details of its investor or corporate structure but that information is shared with regulators when requested. Milton told the newspaper Zhao wasn't available for comment. 

The Journal has previously reported that Zhao is the majority owner of Binance and Binance.US.