I already made a post where I quite dived deep into the American SEC charges/accusations against CZ and Binance. But here is the shortest version:

They didn't register in the US but kept taking US customers and lying about blocking US customers from Binance.com. Then they created Binance.US which was for US customers and was supposed to be controlled by BAM Trading and BAM Management, but CZ was the one controlling it.

Binance.US also didn't put measures in place to stop fraudulent and manipulative acts, but they lied that they did. Binance.US also falsely inflated its trading volume to make it look like big numbers were being traded. And lastly, they didn't explain all the risks involved in some of their investment schemes.

In order to bring you this summary, I had to access the official document filed in court by the SEC (you can read it here for yourself if you want), and something else in this document is the section where the SEC stated their evidence to back all these accusations.

This section called "Facts" showed all the things their investigations uncovered. It showed things the Binance officials were saying and doing behind the scenes as they committed these crimes of theirs, and I'm not gonna lie I found many of these very funny and interesting.

I think it's mostly funny because these guys thought they were smart and that they were "killing it", not knowing they were being watched and already being caught. Lol.

Here are the interesting/funny facts from the investigation:

1. Pg 29: Binance CCO bragged to another Binance compliance officer in December 2018: "we are operating as a fking unlicensed securities exchange in the USA bro"

2. Binance named their plan to do all these without getting sanctioned by the SEC "The Tai Chi" Plan. And if you know anything about Tai Chi it is a form of Kung Fu/Chinese Martial Arts. These guys must have thought they were badass kung-fu hitmen 🤣🤣.

3. They hired a consultant just to help them carry out their acts without being caught, and it was even this consultant who came up with the Tai Chi plan. They called this consultant "Binance Consultant", but that's wrong, he's supposed to have been called "Sensei" or "Chifu" 😭.

4. Binance updated its Terms of Use on June 14, 2019, to say that US persons were not permitted on Binance.com but that Binance.us would be launched for them. However they didn't want to lose their big US customers on .com because of all the big trades they provide, so they told these customers to use VPNs, and to register their KYC with non-US documents.

5. In order for Binance to not be regulated, they created BAM Trading and BAM management, and they said these companies were independent and not under the control of Binance. It was these companies that then launched Binance.us. However, in the background, these companies were controlled by Zhao and Binance.

6. On the advice of Sensei, during the launch of Binance.us, they were to make sure it didn't look like Binance.com had anything to do with .us apart from providing technology. The wise Sensei said: "[o]n the US launch, it is important to NOT link it to the .COM IP blocking [of US investors]. That would suggest both that Binance is aware of previous violations and that BAM and .COM are alter egos of each other coordinating the work.

7. BNB is viewed as a Security by the American SEC and so there are some regulations and registration requirements before you can sell it in the US. But Binance went ahead and sold it in the US via Binance.US knowing that the SEC might come after them. They made some preparations for what they'll do when the SEC comes after them, they estimated that it would simply cost them "$10 million in legal fees and settlements" if the SEC comes after them. They felt like that $10 million was nothing compared to the benefits of listing BNB on .US.

But as we know now, Binance is to pay $4.3 Billion in fines, and CZ is to pay $50 million. That's a far cry from what they expected (however these fines are not only for listing BNB).

8. Binance claimed that BAM Trading and BAM management were independent, but that was not the truth, they were controlled by CZ and Binance. Among all the evidence to show they were controlled by Binance, one of the funniest/most interesting evidence is the fact that one day BAM CEO was alerted that their internal transfers had increased from $10 million a day to $1.5 Billion a day. BAM CEO was surprised because she didn't know anything about all the transfers, so she had to ask Binance about the transfer of all those billions. Remember Binance is supposed to be a different company from BAM. It's almost like Microsoft being surprised about transfers in its accounts and asking Samsung what's happening with these transfers. 🤣🤣🤣

9. In April 2019, CZ said "Credibility is the most important asset for any exchange! If an exchange fakes their volumes, would you trust them with your funds?" But CZ and Binance went ahead to fake the volume on .us. The following, on the "Sigma Chain Wash Trading.." section is the amount of fake trading done in the course of 11 days, just to artificially boost the volume of trade on .us.

Conclusion

Although I've taken some time out to laugh at CZ and Binance in this post, the fact remains that these are generally good guys. The charges against them never alleged that they stole customers' money or mismanaged them, so that's good.

They were only trying to escape US regulations, and even when they faked volume on .us, it was just so that their .us would attract US persons, and the only reason they had to attract US persons this way was because the volume on .us wasn't so impressive since it was newly created to escape full-on US regulations.

They should have done better. In fact, the lengths they went to to escape these regulations makes one feel like subjecting themselves to regulations would have even been better, less costly, and less stressful.

[Cover Image from financialmirror]