How Binance Offered and Sold Its BNB Vault and Simple Earn Programs as Securities

FACTS

VII. BINANCE AND BAM TRADING ENGAGED IN UNREGISTERED OFFERS AND SALES OF SECURITIES.

C. Binance Offered and Sold Its BNB Vault and Simple Earn Programs as Securities.

325. Binance has offered two other securities on the Binance.com Platform—the “BNB Vault” and “Simple Earn” programs.

326. Binance has regularly marketed the Simple Earn and BNB Vault programs as profit-making opportunities to investors in the United States and elsewhere.

327. Binance markets Simple Earn as programs that pay interest to investors who lend their crypto assets to Binance for fixed or flexible lengths of time. The interest paid depends on the crypto asset lent and the duration of the loan. For instance, investors who lent a particular crypto asset through Simple Earn as of April 24, 2023 were promised profits of 18.9%.

328. Binance determines the Simple Earn rate for each of its offerings at its discretion, taking into account various “factors which are carefully designed to ensure that rewards paid to users are sustainable and competitive.”

329. According to Binance, it may pool assets loaned through Simple Earn and use its managerial expertise to deploy them “for a variety of purposes,” including on-chain staking, loans, or for operational purposes by other business units within Binance.

330. Throughout the spring of 2020, Binance tweeted that it was offering a 15% APR for participants in the BUSD-specific Simple Earn product, and 10% in the Simple Earn product for another crypto asset.

331. BNB Vault is a similar program that is limited to holders of BNB and described on Binance.com as a “BNB yield aggregator” whereby investors can lend their BNB to Binance to earn investment returns. 332. In November 2020, Binance announced the BNB Vault launch: “#Binance Launches BNB Vault – Earn Daily Income from the $BNB Ecosystem.”

333. Binance states on its website that BNB “deposited” in BNB Vault will be “flexibly allocated in different products to help users maximize potential rewards.” These products include Simple Earn and “Launchpool,” a product advertised as rewarding users for staking tokens in connection with new token launches. Similar to Simple Earn, Binance has offered varying APR returns for BNB Vault investors.

334. One tweet from Binance touted the profit potential of BNB Vault: “Just one click can increase how much you earn with your #BNB. BNB Vault combines the multiple income benefits of #Binance Smart Chain, Launchpool, Savings, #DeFi Staking, and more through just one interface.” A second tweet linked to a Binance.com page with a heading “Introducing BNB Vault: One-Click Earning for Your BNB Holdings.”

335. In both the Simple Earn and BNB Vault programs, Binance pools the crypto assets lent by investors and uses those assets to generate revenue that was used to pay returns to investors in Simple Earn and BNB Vault. Investors share pro rata the benefits of their pooled investments in the Simple Earn and BNB Vault programs.

336. Binance exercises discretion and uses its entrepreneurial expertise in managing both programs, including identifying liquidity needs, negotiating with Launchpool issuers, choosing terms, holding and controlling the invested assets, and generating revenue, through its operation of the Binance.com Platform to pay the Simple Earn and BNB Vault investors.

337. From October 2019 through October 2022, at least 3,200 and as many as 16,500 U.S. investors have participated in the Simple Earn investment programs, and at least 1,400 U.S. investors have participated in the BNB Vault program. 338. Since the inception of each, Binance has thus offered and sold both Simple Earn and BNB Vault as investment contracts and, therefore, as securities.