FTC v. Binance: Was The Company Really Hiding the Facts?

V. FACTS

J. Binance Knowingly Concealed the Presence of United States Customers In Internal Documents and Data

137. Zhao wanted U.S. customers, including VIP customers, to transact on Binance because it was profitable for Binance to retain those customers. Binance has tracked the sources of its revenues by customers’ geographic location, among other analytical methods.

Zhao routinely received reporting that unambiguously demonstrated that U.S. customers contributed a substantial amount of Binance’s revenues.

For example, Binance tracked revenues derived from U.S. customers and summarized that information in the Binance monthly revenue reports. In addition, Binance’s “Futures Team” created periodic reports that showed the trading volume, revenue to Binance, and other account and transactional information concerning U.S. customers’ derivatives trading.

138. Binance’s revenue reports rely on data drawn from Binance’s internal database. The monthly revenue report for September 2020 reflects that 2.51 million customers were located in “U.S.”

That same month, Binance’s revenue report shows 0.31 million Binance customers’ locations were “UNKWN.” This report, provided to Zhao and at least certain members of Binance senior management, showed:

139. Then in October 2020, the same month a rival digital asset exchange and its principals were sued by the CFTC, Zhao directed Binance personnel to replace the U.S. value for certain data fields in Binance’s internal database with the value UNKWN.

As a result, Binance’s October 2020 monthly revenue report identified approximately 2.83 million customers’ locations as UNKWN, while omitting any reference to U.S.

Thereafter, Binance’s revenue reports continued to attribute U.S.-derived customers and revenue to UNKWN and did not reflect the presence of any customers from the U.S. The October 2020 report, also provided to Zhao and at least certain members of Binance senior management, showed:

140. It is widely understood by Binance personnel that UNKWN is a code word for United States for purposes of interpreting Binance’s internal documents and data. For example, on October 2, 2020, Binance’s Director of Operations told a colleague: “The recent Bitmex incident has had a great impact on the industry. Please remove US data from all our charts together with Big Data. Everyone in the future will not see our US data, except for financial and very few people.”

And in a November 17, 2020 internal chat, the Director of Operations explained: “at present, the keyword US for internal information is also a sensitive word, so you have to use Unknow to mark the country.”