Earlier quoted context omitted.
My theory is that Binance execs were having these chats in an encrypted medium (e.g. WA or Signal) but didn't secure themselves against a defector. I think someone on the inside took screenshots and went to the feds (or started cooperating under legal pressure). There's even a leading candidate [0]. What's funny about this is it's a fine metaphor for what ails crypto as a whole. The technology is cryptographically se…
insert XKCD five dollar wrench comic here
SEC Sues Binance and CEO Zhao for Breaking US Securities Rules
231–240 of 489 posts
Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules
#232Earlier quoted context omitted.
The definition of "security" is pretty objective (Howey test), but the answer it produces tends not to be liked by people in the crypto space, so they argue hard about why it's not a definition of security. What quotes like these do is make it trivial to prove the mens rea (intent) requirements, and put a lie to claims that they didn't know it was a security or that their interpretation as not-a-security was reasonab…
Putting this here in case it's useful. Please correct if it's wrong. What is the Howey test for whether something is a security? """ The Howey Test asks whether a transaction constitutes an "investment contract," which is a type of security. If it is an investment contract, it must satisfy four criteria: It is an investment of money. The investment is in a common enterprise. There is an expectation of profits from th…
Interesting. I'd answer those questions as "Yes. No. Maybe. No." So definitely not a security.
1. Is cryptocurrency an investment of money? Obviously yes, at least in the sense you have to spend money to purchase or mine it.
2. Is cryptocurrency investment in a common enterprise? No. What enterprise? Common with who? Maybe if it's a token issued by a company or something and tied to their profits somehow, but that doesn't apply to any of the common cryptocurrencies like Bitcoin, Etherium, Monero, etc.
3. Is there an expectation of profits? This depends on entirely on the person buying the token and what they intend to use it for.
4. Does any profit come from the efforts of a promoter or third party? No. What promoter? What third party? If the value fluctuates you can make a profit, but there's no third party involved exerting "effort" that's involved in that process.
If you want to argue with me on 2 and 4, explain how cryptocurrency meets those criteria but not, say, gold.
Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules
#233Earlier quoted context omitted.
> but didn't secure themselves against a defector Still a surprisingly amateur move. Once worked for the Federal Government where literally everything you write is potentially subject to a FOIA request. The message all new hires were told was, very clearly: "Never put anything into writing you wouldn't be happy to be see published on the front page of the Washington Post" Anything that was even vaguely close to faili…
Not writing down anything youd be upset another person read is a pretty standard instruction for people doing interactions with ordinary business clients anywhere that data protection legislation theoretically allows them to make a statutory request the company send records you hold about them (Probably other jurisdictions too, if their lawsuits have a discovery process) And that's "dear junior sales team members, pl…
> that's "dear junior sales team members, please don't put your opinion of the client in writing, in the unlikely event they ask for a data dump they might be a bit miffed"
One of my first moves running a trading team is reducing or eliminating internal chat. I don’t think I’ve gone a week without at least one client receiving an inappropriate nickname. It’s harmless. But it’s not something you want showing up in discovery or a regulatory inquiry.
Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules
#234Earlier quoted context omitted.
The government has done a pretty good job of making the process very easy: https://www.foia.gov/ But, just like with ChatGPT, you'll likely have to do a bit of "prompt engineering" to get a specific document. "Give me all the stuff you guys got on UFOS1!!" will likely be less fruitful then "I am requesting the email correspondence between X and Y related to the documented observation of an atmospheric event occurring…
How broad can the request get? Can I ask for any communications that are related to a decision made or drafting of something that goes into the CFR? How much should I expect to pay for these requests, especially while figuring out the prompt engineering?
The cost of the request is often based on how many man hours it will take to fulfill. Different agencies have different rates / different capabilities for performing the document search itself. Some agencies may also reflexively deny requests, which would require a lawyer to sue them to get resolution if you believe the denial doesn't legitimately meet legal exception requirements.
Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules
#235Earlier quoted context omitted.
The definition of "security" is pretty objective (Howey test), but the answer it produces tends not to be liked by people in the crypto space, so they argue hard about why it's not a definition of security. What quotes like these do is make it trivial to prove the mens rea (intent) requirements, and put a lie to claims that they didn't know it was a security or that their interpretation as not-a-security was reasonab…
Putting this here in case it's useful. Please correct if it's wrong. What is the Howey test for whether something is a security? """ The Howey Test asks whether a transaction constitutes an "investment contract," which is a type of security. If it is an investment contract, it must satisfy four criteria: It is an investment of money. The investment is in a common enterprise. There is an expectation of profits from th…
[deleted]
Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules
#236Earlier quoted context omitted.
> being above board SEC has alleged multiple efforts to lie and deceive both regulators and users. It's hard to see how that qualifies as "above board".
The burden is on SEC to prove these allegations. If they took YOU to court, calling YOU a thief, you would expect the burden to be on them, right?
Yes of course. That is why I used the word "alleged".
My point stands, the SEC is not going after Binance just for "being above board but not getting the right license".
Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules
#237Earlier quoted context omitted.
Definitely not when the party who is suing you is the one that defines the rules. Thinking about the scenario of this lawsuit makes me really angry. It's some sort of power demonstration backed by a political strategy.
They are alleging the exchange comingled customer funds and transferred them to another company controlled by Zhao. Why doesn’t that make you angry?
That makes me angry as well. It also makes me angry that my bank does something like this with the money I deposit.
I doubt this is the pivotal point for that case though.
Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules
#238> In one instance, the Binance chief compliance officer messaged a colleague that, “[w]e are operating as a fking unlicensed securities exchange in the USA bro.” Source: https://twitter.com/JohnReedStark/status/1665748594421297152 This is a legendary quote from the filing.
My theory is that Binance execs were having these chats in an encrypted medium (e.g. WA or Signal) but didn't secure themselves against a defector. I think someone on the inside took screenshots and went to the feds (or started cooperating under legal pressure). There's even a leading candidate [0]. What's funny about this is it's a fine metaphor for what ails crypto as a whole. The technology is cryptographically se…
bounty program
Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules
#239Earlier quoted context omitted.
Not really, the only assets they have identified as securities here and the ones that were immediately obvious as securities (BNB etc.). They have made no statement regarding BTC, ETH, etc.
Gensler explicitly stated that BTC was a commodity about a year ago: https://www.benzinga.com/markets/cryptocurrency/22/06/278669...
[deleted]
Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules
#240Earlier quoted context omitted.
Putting this here in case it's useful. Please correct if it's wrong. What is the Howey test for whether something is a security? """ The Howey Test asks whether a transaction constitutes an "investment contract," which is a type of security. If it is an investment contract, it must satisfy four criteria: It is an investment of money. The investment is in a common enterprise. There is an expectation of profits from th…
If you're really, really motivated, you can make facially-plausible arguments against any of the four factors. (Coinbase does this, for example). Common enterprise and expectation of profit are the two factors that are the weakest, and for a pure cryptocurrency like Bitcoin or Ethereum, there's probably not enough to meet common enterprise there. Although by the time you get to staking--especially an exchange offerin…
Importantly, you don't have to convince yourself that you don't meet the Howey test. At the end of the day, if it comes to it, you have to convince a judge while they are being also courted by an adversarial party.
It doesn't matter what your company's interpretation is if a judge says "nah dog that isn't right".
What matters is whether you genuinely believe your interpretation is reasonable
I don't think any of these crypto companies have ever believed they could convince a judge, hence all the hemming and hawing in the public sphere in an attempt to build pressure against the SEC to either give them an out by making a very specific statement that they can work around, or by getting an administration to push the SEC to ignore all the bad stuff in crypto land.