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SEC Sues Binance and CEO Zhao for Breaking US Securities Rules

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Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules

#261

Post by Ajedi32 »

dontreact wrote: post #242
Ajedi32 wrote: post #232

Earlier quoted context omitted.

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 do…

2: The more people buy and hold Bitcoin, the more valuable it becomes. I asked ChatGPT about the definition of common enterprise: The 7th and 2nd Circuits use a "horizontal commonality" test, where a common enterprise is found if the profits of the investors are interdependent - i.e., if the success of the enterprise is tied to the success of other investors. Essentially, the investors' funds are pooled and they shar…

2 is also true of gold and any other commodity.

3 I'd quibble with you about "overwhelming majority", but yes that's a common use of gold. It's a fairly common use of cryptocurrency too though, especially in countries with high inflation.

4 Maybe in that specific situation yes. Sounds like you agree that's not all cryptocurrencies though. It's also kinda weird that something could go from not being a security to being one (and back) depending on how people happen using it at any given moment in time. E.g. If someone somehow managed to orchestrate a pump and dump scheme with silver, would it temporarily become a security for that brief moment in time and then go back to being a commodity afterwards?

Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules

#262

Post by mtrycz2 »

wslh wrote: post #110

I remember the last post from Fred Wilson: "The Freedom To Innovate" [1]. Even if the SEC is right about Binance and others, and there are without doubt blatant and huge frauds in Web3, there are huge problems with the financial modernization within the US (and the world). Domestic wire transfers in US takes longer and are more expensive than in Europe and developing countries such as Brazil and Argentina. The SEC is…

> banks have real power and a clash is inevitable now or in the near future

Bitcoin was derailed from being peer to peer electronic cash to this strange "store of value" that doesn't store value. It heppened almost six years ago, back in 2017.

Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules

#263

Post by mtrycz2 »

wslh wrote: post #110

I remember the last post from Fred Wilson: "The Freedom To Innovate" [1]. Even if the SEC is right about Binance and others, and there are without doubt blatant and huge frauds in Web3, there are huge problems with the financial modernization within the US (and the world). Domestic wire transfers in US takes longer and are more expensive than in Europe and developing countries such as Brazil and Argentina. The SEC is…

> banks have real power and a clash is inevitable now or in the near future

Bitcoin was derailed from being peer to peer electronic cash to this strange "store of value" that doesn't store value. It happened almost six years ago, back in 2017.

Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules

#264

Post by SamReidHughes »

mrguyorama wrote: post #252
SamReidHughes wrote: post #175

Earlier quoted context omitted.

That was after the company collapsed.

Yes and everyone thought Enron was the greatest until their fraud was exposed. When you have minimal transparency it's really easy to cook the books and look good. That's like half the point of regulations around public companies.

That is completely irrelevant.

Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules

#265

Post by dogmayor »

JumpCrisscross wrote: post #233
notahacker wrote: post #228

Earlier quoted context omitted.

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 dis…

So true. Been on both sides of this coin. Lawyers, judges, jurors will jump on any language that gives the slightest impression of bad acting.

Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules

#266

Post by dragonwriter »

PheonixPharts wrote: post #202
setgree wrote: post #148

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…

> 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…

> 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"

> And this was for an org that was doing nothing sneaky or underhanded in the slightest

I disagree. That culture is one of routinely doing sneaky and underhanded things.

If it wasn’t, the rule would be “don’t do anything you wouldn't be happy to be see published on the front page of the Washington Post.”

(Outside of things that are legally cobfidential, but those are generally protected from FOIA even if in writing.)

If you are actively preventing evidence of your actions from being created, that is itself evidence of consciousness of wrongdoing.

Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules

#267

Post by dragonwriter »

civilitty wrote: post #217
PheonixPharts wrote: post #216

Earlier 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?

> Can I ask for any communications that are related to a decision made or drafting of something that goes into the CFR?

The broader the request, the more expensive it is and the lower the likely signal-to-noise ratio of the response is.

Also, on your specific example, there is a broad exemption to FOIA for internal deliberative process-related opinions, conclusions, and recommendations, etc.

Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules

#268

Post by Animats »

Read the court filing. There's a lot of inside information from "BAM CEO A" and "BAM CEO B". These were the first two CEOs of Binance.us. They came on board thinking they had a real job. Then they discovered they were just figureheads. "BAM CEO A" was fired. "BAM CEO B" quit after three months and started cooperating with US regulators.

"Upon assuming his CEO duties, however, BAM CEO B quickly learned that Binance, in fact, exerted and would not relinquish substantial control over BAM Trading and the operation of the Binance.US Platform. As he testified under oath, BAM CEO B did not “have any firsthand knowledge of exactly what [Binance] entity managed [Binance.US Platform’s] servers,” but he knew it “wasn’t [BAM Trading].” Similarly, he also testified that the matching engine was “presumably owned and administered by some [Binance] entity, but I have no idea which one, and then there’s other servers doing other functions.” He concluded, the “biggest risk in this company is we are highly dependent on a bunch of technology that sits in Asia.”

"BAM CEO B tried to implement plans to migrate those functions and control of the crypto assets from Binance to BAM Trading and into the United States, but Zhao quickly overruled him, causing BAM CEO B to resign approximately three months into his tenure."

"As BAM CEO B testified, “[W]hat became clear to me at a certain point was CZ was the CEO of BAM Trading, not me.” He further explained that he spent his first 80 days as CEO trying “to get these core foundational things realigned,” but “was overruled on all of them” by Zhao. BAM CEO B elaborated, “All of the things that we had previously agreed and had worked on for 80 days were suddenly repudiated with no further discussion, and on that day, I realized, huh, I’m not actually the one running this company, and the mission that I believe I signed up for isn’t the mission. And as soon as I realized that, I left.”"

Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules

#269

Post by freejazz »

LatteLazy wrote: post #140

The SEC and CFTC missed FTX being the worlds largest fraud. Now they are desperately going after Binance for... being above board but not getting the right license, during a period when no licenses were offered (and still aren't). At what point is this just pointless bullshit, let exchanges register, regulate them like other exchanges (segregated funds etc) and fuck off already.

how exactly was binance prohibited from registering itself as an exchange in the US?

Re: SEC Sues Binance and CEO Zhao for Breaking US Securities Rules

#270

Post by mhh__ »

gadnuk wrote: post #40

> 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.

First piece of advice I ever got in Finance was to never say anything you wouldn't want your mother seeing on the frontpage of tomorrow's paper.
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