Binance and BAM Trading in Hot Water for Refusing to Register as an Exchange

FACTS

IX. BINANCE AND BAM TRADING WERE REQUIRED TO BUT DID NOT REGISTER AS AN EXCHANGE, BROKER-DEALER, OR CLEARING AGENCY.

510. Binance (through the Binance.com Platform) and Binance and BAM Trading (acting as a group of persons through the Binance.US Platform) used the means and instrumentalities of interstate commerce to bring together the orders of multiple buyers and sellers of crypto assets that were offered and sold as securities using a trading facility programmed with non-discretionary rules for orders to interact and for buyers and sellers to agree upon the terms of trades in these securities. Binance and BAM Trading were therefore each required to register with the SEC as a national securities exchange or operate pursuant to an exemption from registration, but did not do so.

511. Binance and BAM Trading used the means and instrumentalities of interstate commerce to engage in the business of effecting transactions in securities for the account of others by, for example, soliciting potential investors in crypto asset securities, holding themselves out as places to buy and sell crypto asset securities, facilitating trading in crypto asset securities by opening customer accounts, handling customer funds and crypto asset securities (which they commingled and treated as fungible) through Binance and BAM Trading-controlled accounts and digital wallets, and being compensated for doing so. Binance and BAM Trading were therefore each required to register with the SEC as a broker or operate pursuant to an exemption from registration, but did not do so.

512. Binance used means and instrumentalities of interstate commerce to regularly purchase and sell crypto asset securities for its own accounts while providing Binance OTC services. Binance held itself out as a dealer by advertising its Binance OTC services on its website and on social media to solicit new customers, and through these services, quoted prices directly to users, served as the counterparty to all block trades transacted through Binance OTC, and earned fees from the spread on each completed block trade. Binance was therefore required to register with the SEC as a dealer or operate pursuant to an exemption, but did not do so.

513. Binance (as to trading on the Binance.com Platform) and Binance and BAM Trading (as to trading on the Binance.US Platform) each served as an intermediary in settling all transactions in crypto asset securities occurring on these platforms. They also each acted as a custodian of securities by requiring customers to deposit their crypto asset securities in Binancecontrolled (or, in the case of the Binance.US Platform – Binance and BAM Trading-controlled) wallets, and creating a system for the central handling of securities whereby crypto asset securities deposited, held, traded, and/or accrued on the Binance Platforms were treated as fungible and customer accounts debited and credited by Binance and BAM Trading to settle customers’ transactions. Binance and BAM Trading were therefore each required to register with the SEC as a clearing agency or operate pursuant to an exemption, but did not do so.