The US Securities and Exchange Commission (SEC) lawsuit against Binance brings a number of allegations against the world's largest cryptocurrency exchange as well as other defendants - including CEO Changpeng Zhao.
In the lawsuit, the SEC cited internal communications, such as emails and other quotes from Binance employees.
The SEC declared that Binance, BAM Trading and CZ violated securities laws.
However, Binance refuted the claims calling them “fallen” and “disappointing”.
In accordance with general US regulatory practice, the SEC refers to employees of Binance and related persons by their job titles — without identifying them.
This is what the SEC alleges that Binance employees mentioned in their statement.
Zhao is named throughout the 136-page lawsuit — both in quotes and because he is the defendant.
He allegedly pushed Binance to “encourage customers to circumvent Binance from working with US IP addresses by using a VPN service to conceal their location”. And the CCO drafted a “VIP customer handling document” which “instructed Binance staff to ensure US customers opened new accounts “not related to US documents” and notified customers "keep this a secret".
“We don't want to lose all our VIP customers because they actually contribute quite a lot. So, ideally, we would help them facilitate the registration of companies or transfer the volume of transactions abroad in some way that we can accept without being completely labeled. It's all the United States," Zhao allegedly said in June 2019 during his "weekly Binance summit."
At the meeting a few days later, Zhao said:
“We need to let users know that they can change their KYC (identity verification) on Binance.com and continue using it. But it is necessary to screen messages very carefully because whatever we send will be made public. We can't bear the responsibility for that."
“A few days later, Binance’s Chief Marketing Officer (CMO) reported that the team reached out to 22 top US VIP clients, and those 19 customers “agreed to change their KYC or change their IP,” the lawsuit said. the event said in the only section that mentions the CMO.
One of the most cited people in the 136-page lawsuit is the CCO of Binance.
The quote that will probably get the most attention is the one from December 2018:
“We are operating as an unlicensed stock exchange in the United States.”
But they also allegedly said “we don’t want Binance.com to be regulated forever.” According to a screenshot included in the lawsuit, Binance “created local entities to register with the regulator and subject to prohibition. So BAM, BAS etc are regulated/licensed entities”.
In an announcement from 2020, a screenshot shows the Binance CCO saying that “on the surface, we can’t have users in the US, but in reality, we should attract them through channels. other creative means”.
Regarding the alleged treatment of VIP customers, the CCO is quoted as saying:
“We ask them to join the US and then if their volume is really huge… we will strongly push the .com side to accept on a special basis… we always have a way to give whale… If we do it, a competitor's cryptocurrency trading platform will do it.
CZ would certainly agree… I was briefed by senior management to always seek to support the business.”
A chief financial officer (CFO) of Binance allegedly told Zhao that the “first goal” was “to protect Binance.com from the claws of the US regulator.” To do so, Binance needs to launch a new crypto platform in the country, and “the main goal of that platform is to crackdown the loss of users from the United States.”
The lawsuit also includes conversations in 2019 between the CCO and CFO about listing BNB on the Binance.US platform.
“In an internal conversation in September 2019, Binance CFO and CCO agreed that “CZ is willing to take the legal risk of listing BNB, if they can figure out how to quantify it.”
"Removing US customers from .com cost him a lot of money, he's bound to get that revenue back somehow," the CCO replied.
In the event of a Wells notice or subpoena – which both the CFO and the CCO are said to have acknowledged could happen after the SEC's enforcement action against Kik Interactive, they will "start preparing things". "including "war chests".
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Minh Anh
According to Blockworks
