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SEC v. Consensys Software Inc. Court Filing, retrieved on June 28, 2024, is part of HackerNoon’s Legal PDF Series. You can jump to any part in this filing here. This part is 20 of 26. C. Consensys—through MetaMask Staking—Offers and Sells the Lido and Rocket Pool Investment Contracts. i. Through MetaMask Staking, Consensys Promotes, Offers, and Sells the Lido and Rocket Pool Investment Contracts To Its Users. 286. On January 13, 2023, Consensys publicly announced the release of a program called MetaMask Staking. 287. Consensys created MetaMask Staking to offer and sell the Lido and Rocket Pool staking program investment contracts to investors. 288. The January 13 announcement stated: “MetaMask Staking allows you to engage in liquid staking with two prominent providers, Lido and Rocket Pool, where by you can deposit your ETH and receive a token representing the value of your stake in return.” 289. It called MetaMask Staking “an easy and convenient way to stake ETH.” 290. On January 13, 2023, Consensys posted on the MetaMask Twitter account: “We are extremely happy to announce that you can now stake ETH with Lido or Rocket Pool through the [MetaMask] Portfolio Dapp.” This post included an image advertising “5.22% rewards” with Lido and “4.59% rewards” with Rocket Pool—highlighting the former as the “Highest rewards.” 291. On May 16, 2023, Consensys posted on the MetaMask Twitter account: “[U]sers can now stake and withdraw ETH directly from our liquid staking providers, Rocket Pool and Lido.” And “Get started here,” pointing to a link to the MetaMask portfolio website. 292. In promotional materials, Consensys claimed that MetaMask Staking would make it easier for individual holders of ETH to participate in staking. 293. Specifically, in its January 13, 2023, announcement on its website, Consensys stated: “[S]taking can be a convoluted and complicated process for end-users. MetaMask Staking will offer an easy-to-understand and trusted entry point for users interested in staking. Through this new feature, users can compare the rewards rate, network control, and popularity of different liquid staking providers and choose the one they want to stake with.” ii. Consensys’s MetaMask Staking User Interface. 294. To use MetaMask Staking, investors must have ETH in their MetaMask Wallet. 295. First, from the browser extension or mobile app, the investor clicks on “Stake,” or “Staking.” They are then taken to the MetaMask Portfolio site, where they can then choose “ETH.” 296. At this point, Consensys’s graphical interface presents the investor with two options: Lido and Rocket Pool. 298. If either Lido or Rocket Pool is at or near capacity, Consensys’s MetaMask Staking software disables the ability to stake with that program. 299. In any event, an investor can choose either the Lido or Rocket Pool staking program by clicking “Stake.” 300. On the following screen, an investor can input the number of ETH that they would like to invest in one of the staking program investment contracts and click “review.” 301. At that point, Consensys’s MetaMask Staking software shows the investor a screen with the number of the staking pool tokens they will receive in return, their “estimated rewards,” and the “estimated gas fee.” 302. If the investor wishes to proceed with their request to invest in the staking program investment contract, the investor clicks “confirm.” 303. If MetaMask Staking successfully completes the transaction, the investor will see a screen that says, “Transaction Complete.” iii. Consensys Offers and Sells the Lido and Rocket Pool Investment Contracts To Investors. 304. Accordingly, Consensys offers and sells the Lido and Rocket Pool investment contracts to investors through the MetaMask Staking platform. 305. Consensys makes this process appear simple and easy to non-technical investors, while performing the technical series of actions necessary to transfer the investor’s ETH to Lido or Rocket Pool and transfer stETH or rETH to the investor in return. 306. When the investor clicks “confirm,” this signals the MetaMask Staking software to take the steps necessary to exchange the investor’s ETH for rETH or stETH. Specifically, Consensys has programed MetaMask Staking software to take the steps described below. 307. First, Consensys’s MetaMask Staking software reads the private key associated with the ETH in the investor’s MetaMask Wallet. 308. Second, using this key, the software creates a blockchain transaction and transfers the investor’s ETH from the investor’s MetaMask Wallet into a smart contract called the MetaMask Staking Aggregator Router Smart Contract (the “MM Staking Router Smart Contract”). 309. The MM Staking Router Smart Contract has its own Ethereum blockchain address. 310. The investor has no control over the MM Staking Router Smart Contract. 311. The MM Staking Router Smart Contract address temporarily holds the investor’s ETH. 312. Although Consensys has programmed its MetaMask Staking software so that Consensys can take a fee for each transaction, Consensys currently sets the fee variable at zero (i.e., it does not take a fee at this time). 313. Consensys could, however, change the software at any time to assess a fee, in which case the amount of the fee would be diverted from the MM Staking Router Smart Contract into a blockchain address designated by Consensys. 314. Third, Consensys’s software transfers the investor’s ETH from the MM Staking Router Smart Contract to the Lido or Rocket Pool Proxy smart contract (deployed by Lido and Rocket Pool, respectively). 315. These Proxy smart contracts mint stETH or rETH, respectively, upon receiving a deposit of ETH, and, if the MM Staking Router Smart Contract sends ETH to the Proxy smart contracts, the Proxy smart contracts will transfer newly minted stETH or rETH, respectively, to the MM Staking Router Smart Contract. 316. Fourth, the MM Staking Router Smart Contract transfers the stETH or rETH, as the case may be, to the investor’s MetaMask Wallet. 317. As of March 11, 2024, investors had invested 100,252 ETH in the Lido staking program through MetaMask Staking and 8,375 ETH in the Rocket Pool staking program through MetaMask Staking. 318. As of March 11, 2024, Consensys, through MetaMask Staking, offered and sold the Lido staking program to 32,449 unique blockchain addresses and offered and sold the Rocket Pool staking programs to 2,215 unique blockchain addresses. 319. For its part, Lido embraced MetaMask Staking as a platform through which its staking program would be offered and sold. 320. On January 17, 2023, Lido announced on its blog that “Ethereum staking with Lido is now live on MetaMask! Stake your ETH on MetaMask to earn yield and secure the Ethereum network from the comfort of your wallet.” 321. Moreover, a former Lido employee testified that “in terms of a distribution channel [Consensys’s MetaMask was] a very highly valued target.” 322. Accordingly, by the conduct described above, Consensys offered and sold, and continues to offer and sell, investment contracts for Lido and Rocket Pool, participating directly in the distribution of securities from the issuers—Lido and Rocket Pool—to the investor. Continue Reading Here. About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings.
This court case retrieved on June 28, 2024, storage.courtlistener.com is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. SEC v. Consensys Software Inc. Court Filing, retrieved on June 28, 2024, is part of HackerNoon’s Legal PDF Series. You can jump to any part in this filing here. This part is 20 of 26. SEC v. Consensys Software Inc. Court Filing, retrieved on June 28, 2024, is part of HackerNoon’s Legal PDF Series . You can jump to any part in this filing here . This part is 20 of 26. HackerNoon’s Legal PDF Series here C. Consensys—through MetaMask Staking—Offers and Sells the Lido and Rocket Pool Investment Contracts. i. Through MetaMask Staking, Consensys Promotes, Offers, and Sells the Lido and Rocket Pool Investment Contracts To Its Users. i. Through MetaMask Staking, Consensys Promotes, Offers, and Sells the Lido and Rocket Pool Investment Contracts To Its Users. 286. On January 13, 2023, Consensys publicly announced the release of a program called MetaMask Staking. 287. Consensys created MetaMask Staking to offer and sell the Lido and Rocket Pool staking program investment contracts to investors. 288. The January 13 announcement stated: “MetaMask Staking allows you to engage in liquid staking with two prominent providers, Lido and Rocket Pool, where by you can deposit your ETH and receive a token representing the value of your stake in return.” 289. It called MetaMask Staking “an easy and convenient way to stake ETH.” 290. On January 13, 2023, Consensys posted on the MetaMask Twitter account: “We are extremely happy to announce that you can now stake ETH with Lido or Rocket Pool through the [MetaMask] Portfolio Dapp.” This post included an image advertising “5.22% rewards” with Lido and “4.59% rewards” with Rocket Pool—highlighting the former as the “Highest rewards.” 291. On May 16, 2023, Consensys posted on the MetaMask Twitter account: “[U]sers can now stake and withdraw ETH directly from our liquid staking providers, Rocket Pool and Lido.” And “Get started here,” pointing to a link to the MetaMask portfolio website. 292. In promotional materials, Consensys claimed that MetaMask Staking would make it easier for individual holders of ETH to participate in staking. 293. Specifically, in its January 13, 2023, announcement on its website, Consensys stated: “[S]taking can be a convoluted and complicated process for end-users. MetaMask Staking will offer an easy-to-understand and trusted entry point for users interested in staking. Through this new feature, users can compare the rewards rate, network control, and popularity of different liquid staking providers and choose the one they want to stake with.” ii. Consensys’s MetaMask Staking User Interface. ii. Consensys’s MetaMask Staking User Interface. 294. To use MetaMask Staking, investors must have ETH in their MetaMask Wallet. 295. First, from the browser extension or mobile app, the investor clicks on “Stake,” or “Staking.” They are then taken to the MetaMask Portfolio site, where they can then choose “ETH.” 296. At this point, Consensys’s graphical interface presents the investor with two options: Lido and Rocket Pool. 298. If either Lido or Rocket Pool is at or near capacity, Consensys’s MetaMask Staking software disables the ability to stake with that program. 299. In any event, an investor can choose either the Lido or Rocket Pool staking program by clicking “Stake.” 300. On the following screen, an investor can input the number of ETH that they would like to invest in one of the staking program investment contracts and click “review.” 301. At that point, Consensys’s MetaMask Staking software shows the investor a screen with the number of the staking pool tokens they will receive in return, their “estimated rewards,” and the “estimated gas fee.” 302. If the investor wishes to proceed with their request to invest in the staking program investment contract, the investor clicks “confirm.” 303. If MetaMask Staking successfully completes the transaction, the investor will see a screen that says, “Transaction Complete.” iii. Consensys Offers and Sells the Lido and Rocket Pool Investment Contracts To Investors. iii. Consensys Offers and Sells the Lido and Rocket Pool Investment Contracts To Investors. 304. Accordingly, Consensys offers and sells the Lido and Rocket Pool investment contracts to investors through the MetaMask Staking platform. 305. Consensys makes this process appear simple and easy to non-technical investors, while performing the technical series of actions necessary to transfer the investor’s ETH to Lido or Rocket Pool and transfer stETH or rETH to the investor in return. 306. When the investor clicks “confirm,” this signals the MetaMask Staking software to take the steps necessary to exchange the investor’s ETH for rETH or stETH. Specifically, Consensys has programed MetaMask Staking software to take the steps described below. 307. First, Consensys’s MetaMask Staking software reads the private key associated with the ETH in the investor’s MetaMask Wallet. 308. Second, using this key, the software creates a blockchain transaction and transfers the investor’s ETH from the investor’s MetaMask Wallet into a smart contract called the MetaMask Staking Aggregator Router Smart Contract (the “MM Staking Router Smart Contract”). 309. The MM Staking Router Smart Contract has its own Ethereum blockchain address. 310. The investor has no control over the MM Staking Router Smart Contract. 311. The MM Staking Router Smart Contract address temporarily holds the investor’s ETH. 312. Although Consensys has programmed its MetaMask Staking software so that Consensys can take a fee for each transaction, Consensys currently sets the fee variable at zero (i.e., it does not take a fee at this time). 313. Consensys could, however, change the software at any time to assess a fee, in which case the amount of the fee would be diverted from the MM Staking Router Smart Contract into a blockchain address designated by Consensys. 314. Third, Consensys’s software transfers the investor’s ETH from the MM Staking Router Smart Contract to the Lido or Rocket Pool Proxy smart contract (deployed by Lido and Rocket Pool, respectively). 315. These Proxy smart contracts mint stETH or rETH, respectively, upon receiving a deposit of ETH, and, if the MM Staking Router Smart Contract sends ETH to the Proxy smart contracts, the Proxy smart contracts will transfer newly minted stETH or rETH, respectively, to the MM Staking Router Smart Contract. 316. Fourth, the MM Staking Router Smart Contract transfers the stETH or rETH, as the case may be, to the investor’s MetaMask Wallet. 317. As of March 11, 2024, investors had invested 100,252 ETH in the Lido staking program through MetaMask Staking and 8,375 ETH in the Rocket Pool staking program through MetaMask Staking. 318. As of March 11, 2024, Consensys, through MetaMask Staking, offered and sold the Lido staking program to 32,449 unique blockchain addresses and offered and sold the Rocket Pool staking programs to 2,215 unique blockchain addresses. 319. For its part, Lido embraced MetaMask Staking as a platform through which its staking program would be offered and sold. 320. On January 17, 2023, Lido announced on its blog that “Ethereum staking with Lido is now live on MetaMask! Stake your ETH on MetaMask to earn yield and secure the Ethereum network from the comfort of your wallet.” 321. Moreover, a former Lido employee testified that “in terms of a distribution channel [Consensys’s MetaMask was] a very highly valued target.” 322. Accordingly, by the conduct described above, Consensys offered and sold, and continues to offer and sell, investment contracts for Lido and Rocket Pool, participating directly in the distribution of securities from the issuers—Lido and Rocket Pool—to the investor. Continue Reading Here. Continue Reading Here . Here About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings. This court case retrieved on June 28, 2024, storage.courtlistener.com is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings. This court case retrieved on June 28, 2024, storage.courtlistener.com is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. storage.courtlistener.com

MetaMask Staking Faces SEC Scrutiny Over Lido and Rocket Pool Offerings

মেটামাস্ক স্টেকিং লিডো এবং রকেট পুল অফারগুলির উপর এসইসি স্ক্রুটিনির মুখোমুখি হয়

MetaMask Staking steht wegen Lido- und Rocket Pool-Angeboten unter Beobachtung der SEC

MetaMask Stake se enfrenta al escrutinio de la SEC por las ofertas de Lido y Rocket Pool

MetaMask Staking fait l'objet d'un examen minutieux par la SEC sur les offres de Lido et de Rocket Pool

मेटामास्क स्टेकिंग को लीडो और रॉकेट पूल ऑफरिंग पर SEC जांच का सामना करना पड़ रहा है

MetaMask ステーキング、Lido および Rocket Pool の提供に関して SEC の監視に直面

MetaMask 스테이킹, Lido 및 로켓 풀 제공에 대한 SEC 조사에 직면

MetaMask Staking enfrenta escrutínio da SEC sobre ofertas de Lido e Rocket Pool

Стейкинг MetaMask подвергается проверке SEC в отношении предложений Lido и Rocket Pool

MetaMask Staking, Lido ve Roket Havuzu Teklifleri Üzerinden SEC İncelemesiyle Karşı Karşıya

MetaMask Stake phải đối mặt với sự giám sát của SEC đối với các dịch vụ Lido và Rocket Pool

MetaMask Staking 因 Lido 和 Rocket Pool 发行面临美国证券交易委员会的审查

SEC v. Consensys Software Inc. Court Filing, retrieved on June 28, 2024, is part of HackerNoon’s Legal PDF Series. You can jump to any part in this filing here. This part is 19 of 26. B. Liquid Staking Pool Providers: Lido and Rocket Pool 238. Lido and Rocket Pool have each created and maintained respective staking programs, designed to capture the staking rewards described above. 239. Lido and Rocket Pool each call their program a “liquid staking” program because— as described below—investors are issued a tradable token in exchange for depositing funds into the program. This token represents the investor’s interest in the program. The token issued in exchange is referred to as a “liquid staking token” or “LST” and the LST can be traded on the secondary market. 240. In Lido, the LST is called stETH; in Rocket Pool, the LST is called rETH. 241. The amount of LST an investor receives is proportional to the amount of ETH they deposit. 242. These staking programs allow investors to both obtain the rewards of staking and also purportedly retain the ability to redeem the value of their investment at any time. i. The Lido Staking Program Is An Investment Contract. 243. Lido launched its liquid staking platform in December 2020. 244. To participate, investors deposit ETH with Lido. 245. In return, Lido issues the investor another crypto asset, “stETH,” representing the investor’s pro rata interest in Lido’s staking program, including the investor’s original deposit of ETH plus any accumulated returns. 246. Lido then uses investors’ deposited ETH in the Ethereum consensus mechanism to earn staking rewards—the financial returns for investors. 247. Specifically, Lido pools the ETH deposited by investors into a Lido smart contract, which initiates the creation of a validator by depositing a 32 ETH bundle to the Ethereum validator deposit contract. 248. As of June 25, 2024, over 28% of all staked ETH on Ethereum is staked in Lido’s staking program. 249. Lido takes, as a fee, 10% of the staking rewards earned. 250. The remaining rewards are accrued, pro rata, by stETH token holders. 251. Lido markets its staking program as an investment opportunity. 252. Lido also leads investors to reasonably expect that investors’ profits will come from Lido’s efforts. 253. According to Lido’s website, from December 2020 to February 2024, Lido’s staking program returned an annualized percentage gain of 3% to 9%. 254. In a blog post dated December 28, 2020, Lido stated: “Lido allows users to stake any amount of ETH – without the need to maintain complex infrastructure.” 255. From at least June 2021 to June 2024, in a “Help” article on its website, Lido stated that staking “requires expert knowledge and complex and costly infrastructure” and that through Lido “users can eliminate these inconveniences.” 256. Lido claimed in an October 2020 document posted to its website that it is “more profitable” than other staking pool providers because of its fee model and the quality of its node operators. 257. From at least February 2023 to June 2024, another “Help” article on Lido’s website claims to allocate investors’ staked ETH across multiple, high-quality validator node operators (that is, participants in the Ethereum network consensus mechanism), minimizing the risks associated with staking ETH. 258. In the same Help article, Lido states that it elects “professional and reputable node operators” and that the penalty and slashing risks are reduced “given the quality of the Lido validator set and its proven track record.” 259. In short, Lido purportedly offers investors a “simplified participation in staking”— deploying its resources and expertise to achieve staking rewards that individual investors typically would not be able to achieve on their own. 260. The holder of any stETH—whether issued directly from Lido or purchased in the secondary market—has the right to deliver the stETH to Lido to get back the pro-rata staked ETH plus accrued rewards. 261. Lido treats all investors’ deposited ETH as fungible. It does not purport to segregate investor funds. 262. In light of the above, Lido offered and sold its staking program as an investment contract. ii. The Rocket Pool Staking Program Is An Investment Contract 263. Rocket Pool launched its platform in October 2021. 264. To participate, investors deposit ETH with Rocket Pool. 265. In return, Rocket Pool issues another crypto asset, “rETH,” representing the investor’s pro rata interest in Rocket Pool’s staking program, including the investor’s original deposit of ETH plus any accumulated returns. 266. Rocket Pool then uses investors’ deposited ETH in the Ethereum consensus mechanism to earn staking rewards—the financial returns for investors. 267. Specifically, Rocket Pool pools the ETH deposited by investors into a Rocket Pool smart contract, which initiates the creation of a validator by depositing a 32-ETH bundle to the Ethereum validator deposit contract. 268. Rocket Pool takes a 0.05% fee of the staking rewards it earns. 269. The remaining staking rewards accrue, pro-rata, to investors. 270. Rocket Pool also markets its staking program as an investment opportunity. 271. According to Rocket Pool’s website, rETH “accrues value over time.” 272. Rocket Pool also leads investors to reasonably expect that investors’ profits will come from the efforts of Rocket Pool. 273. As of June 2024, Rocket Pool advertised on its website an annual percentage return of approximately 3.11%. 274. In an FAQ available on its website, Rocket Pool notes that its staking service makes staking available to investors who might not otherwise have the technical expertise necessary to interact with smart contracts or keep a node running 24/7. 275. Indeed, according to Rocket Pool’s FAQ, its program “removes several high barriers to entry that exist with Proof of Stake on Ethereum.” 276. In a January 22, 2021, Medium Post, Rocket Pool stated that its program was “an easy and permissionless way to engage in staking without needing to run any staking infrastructure or even have 32 ETH.” 277. The Rocket Pool FAQ states that it will “allow anyone to earn rewards on deposits as small as 0.01 ETH.” 278. On its website, Rocket Pool also attempts to differentiate itself from other staking pool providers, claiming that “Rocket Pool is the only staking platform with a perfect score on ethereum.org.” 279. According to Rocket Pool’s website, its protocol is highly secure and its “smart contracts have been extensively audited, multiple times, by some of the best auditors in the Ethereum ecosystem.” 280. Rocket Pool also touts other reasons for investors to stake their ETH with Rocket Pool. 281. In the January 2021 Medium post, Rocket Pool notes that the value of rETH is “protected against node slashing and downtime by several built in insurance mechanisms.” 282. Specifically, Rocket Pool requires individuals that run Rocket Pool validator nodes to put up collateral to protect against losses that may result from penalties and slashing. 283. Rocket Pool’s website states that “every rETH token is exactly the same, you will automatically receive the benefits of staking just by holding the token!” (Emphasis in original.) 284. In light of the above, Rocket Pool offered and sold its staking program as an investment contract. 285. Neither Lido nor Rocket Pool have ever filed registration statements with the SEC for the offer and sale of their respective staking program investment contracts. Continue Reading Here. About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings.
This court case retrieved on June 28, 2024, storage.courtlistener.com is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. SEC v. Consensys Software Inc. Court Filing, retrieved on June 28, 2024, is part of HackerNoon’s Legal PDF Series. You can jump to any part in this filing here. This part is 19 of 26. SEC v. Consensys Software Inc. Court Filing, retrieved on June 28, 2024, is part of HackerNoon’s Legal PDF Series . You can jump to any part in this filing here . This part is 19 of 26. HackerNoon’s Legal PDF Series here B. Liquid Staking Pool Providers: Lido and Rocket Pool 238. Lido and Rocket Pool have each created and maintained respective staking programs, designed to capture the staking rewards described above. 239. Lido and Rocket Pool each call their program a “liquid staking” program because— as described below—investors are issued a tradable token in exchange for depositing funds into the program. This token represents the investor’s interest in the program. The token issued in exchange is referred to as a “liquid staking token” or “LST” and the LST can be traded on the secondary market. 240. In Lido, the LST is called stETH; in Rocket Pool, the LST is called rETH. 241. The amount of LST an investor receives is proportional to the amount of ETH they deposit. 242. These staking programs allow investors to both obtain the rewards of staking and also purportedly retain the ability to redeem the value of their investment at any time. i. The Lido Staking Program Is An Investment Contract. i. The Lido Staking Program Is An Investment Contract. 243. Lido launched its liquid staking platform in December 2020. 244. To participate, investors deposit ETH with Lido. 245. In return, Lido issues the investor another crypto asset, “stETH,” representing the investor’s pro rata interest in Lido’s staking program, including the investor’s original deposit of ETH plus any accumulated returns. 246. Lido then uses investors’ deposited ETH in the Ethereum consensus mechanism to earn staking rewards—the financial returns for investors. 247. Specifically, Lido pools the ETH deposited by investors into a Lido smart contract, which initiates the creation of a validator by depositing a 32 ETH bundle to the Ethereum validator deposit contract. 248. As of June 25, 2024, over 28% of all staked ETH on Ethereum is staked in Lido’s staking program. 249. Lido takes, as a fee, 10% of the staking rewards earned. 250. The remaining rewards are accrued, pro rata, by stETH token holders. 251. Lido markets its staking program as an investment opportunity. 252. Lido also leads investors to reasonably expect that investors’ profits will come from Lido’s efforts. 253. According to Lido’s website, from December 2020 to February 2024, Lido’s staking program returned an annualized percentage gain of 3% to 9%. 254. In a blog post dated December 28, 2020, Lido stated: “Lido allows users to stake any amount of ETH – without the need to maintain complex infrastructure.” 255. From at least June 2021 to June 2024, in a “Help” article on its website, Lido stated that staking “requires expert knowledge and complex and costly infrastructure” and that through Lido “users can eliminate these inconveniences.” 256. Lido claimed in an October 2020 document posted to its website that it is “more profitable” than other staking pool providers because of its fee model and the quality of its node operators. 257. From at least February 2023 to June 2024, another “Help” article on Lido’s website claims to allocate investors’ staked ETH across multiple, high-quality validator node operators (that is, participants in the Ethereum network consensus mechanism), minimizing the risks associated with staking ETH. 258. In the same Help article, Lido states that it elects “professional and reputable node operators” and that the penalty and slashing risks are reduced “given the quality of the Lido validator set and its proven track record.” 259. In short, Lido purportedly offers investors a “simplified participation in staking”— deploying its resources and expertise to achieve staking rewards that individual investors typically would not be able to achieve on their own. 260. The holder of any stETH—whether issued directly from Lido or purchased in the secondary market—has the right to deliver the stETH to Lido to get back the pro-rata staked ETH plus accrued rewards. 261. Lido treats all investors’ deposited ETH as fungible. It does not purport to segregate investor funds. 262. In light of the above, Lido offered and sold its staking program as an investment contract. ii. The Rocket Pool Staking Program Is An Investment Contract ii. The Rocket Pool Staking Program Is An Investment Contract 263. Rocket Pool launched its platform in October 2021. 264. To participate, investors deposit ETH with Rocket Pool. 265. In return, Rocket Pool issues another crypto asset, “rETH,” representing the investor’s pro rata interest in Rocket Pool’s staking program, including the investor’s original deposit of ETH plus any accumulated returns. 266. Rocket Pool then uses investors’ deposited ETH in the Ethereum consensus mechanism to earn staking rewards—the financial returns for investors. 267. Specifically, Rocket Pool pools the ETH deposited by investors into a Rocket Pool smart contract, which initiates the creation of a validator by depositing a 32-ETH bundle to the Ethereum validator deposit contract. 268. Rocket Pool takes a 0.05% fee of the staking rewards it earns. 269. The remaining staking rewards accrue, pro-rata, to investors. 270. Rocket Pool also markets its staking program as an investment opportunity. 271. According to Rocket Pool’s website, rETH “accrues value over time.” 272. Rocket Pool also leads investors to reasonably expect that investors’ profits will come from the efforts of Rocket Pool. 273. As of June 2024, Rocket Pool advertised on its website an annual percentage return of approximately 3.11%. 274. In an FAQ available on its website, Rocket Pool notes that its staking service makes staking available to investors who might not otherwise have the technical expertise necessary to interact with smart contracts or keep a node running 24/7. 275. Indeed, according to Rocket Pool’s FAQ, its program “removes several high barriers to entry that exist with Proof of Stake on Ethereum.” 276. In a January 22, 2021, Medium Post, Rocket Pool stated that its program was “an easy and permissionless way to engage in staking without needing to run any staking infrastructure or even have 32 ETH.” 277. The Rocket Pool FAQ states that it will “allow anyone to earn rewards on deposits as small as 0.01 ETH.” 278. On its website, Rocket Pool also attempts to differentiate itself from other staking pool providers, claiming that “Rocket Pool is the only staking platform with a perfect score on ethereum.org.” 279. According to Rocket Pool’s website, its protocol is highly secure and its “smart contracts have been extensively audited, multiple times, by some of the best auditors in the Ethereum ecosystem.” 280. Rocket Pool also touts other reasons for investors to stake their ETH with Rocket Pool. 281. In the January 2021 Medium post, Rocket Pool notes that the value of rETH is “protected against node slashing and downtime by several built in insurance mechanisms.” 282. Specifically, Rocket Pool requires individuals that run Rocket Pool validator nodes to put up collateral to protect against losses that may result from penalties and slashing. 283. Rocket Pool’s website states that “every rETH token is exactly the same, you will automatically receive the benefits of staking just by holding the token!” (Emphasis in original.) automatically receive the benefits of staking just by holding the token!” 284. In light of the above, Rocket Pool offered and sold its staking program as an investment contract. 285. Neither Lido nor Rocket Pool have ever filed registration statements with the SEC for the offer and sale of their respective staking program investment contracts. Continue Reading Here. Continue Reading Here . Here About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings. This court case retrieved on June 28, 2024, storage.courtlistener.com is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings. This court case retrieved on June 28, 2024, storage.courtlistener.com is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. storage.courtlistener.com

Crypto Giants Lido and Rocket Pool Face SEC Scrutiny Over Staking Programs

SEC v. Consensys Software Inc. Court Filing, retrieved on June 28, 2024, is part of HackerNoon’s Legal PDF Series. You can jump to any part in this filing here. This part is 14 of 26. B. MANA 162. “MANA” is the digital token minted by Decentraland. Decentraland is a virtual reality platform that began development in June 2015 but was not made available to the public until its launch in February 2020. Decentraland was launched through an entity named Metaverse Holdings by a team of core individual developers: Ariel Meilich, Esteban Ordano, Manual Araoz, and Yemel Jardi. Decentraland operates on the Ethereum blockchain. According to Decentraland’s website, www.decentraland.org, Decentraland is a three-dimensional virtual reality platform, where users can create, experience, and monetize their content and applications. 163. According to Decentraland’s website, MANA serves as the crypto asset involved in all transactions in the Decentraland virtual reality ecosystem. On August 18, 2017, Decentraland held an initial coin offering in which MANA tokens were exchanged for ETH tokens, raising approximately $24.1 million. Currently, there is a total supply of approximately 2.19 billion MANA tokens. 164. Decentraland offered early contributors to the Decentraland ecosystem a discounted price when purchasing MANA. 165. From the time of its offering, MANA was offered and sold as an investment contract and therefore a security. 166. The price of all MANA tokens goes up or down together. 167. MANA has been available for buying and selling through MetaMask Swaps since at least October 2020. 168. The information Decentraland publicly disseminated would lead a reasonable investor, including those who have purchased MANA since October 2020, to view MANA as an investment. Specifically, MANA holders would reasonably expect to profit from Decentraland’s efforts to grow the Decentraland protocol because this growth would in turn increase the demand for and value of MANA. 169. Investor proceeds raised during the MANA ICO were pooled to fund the marketing, business expenses, and completion of the Decentraland platform. For instance, on July 5, 2017—a few weeks before the MANA ICO—Jardi published a blog post detailing Decentraland’s intended use of revenue from the token sale as follows: The blog post further explained that the “top priority“for use of the revenue was to develop a virtual world and that even after Decentraland was created, “the development budget will focus on the continued improvement of the end-user experience within the world browser“. Indeed, Meilich explained in a separate blog post that after the ICO, Decentraland would implement a “Continuous Token Model,“ where it would increase the MANA supply by 8 percent in the first year, followed by a lower rate in subsequent years, to allow Decentraland to “regularly expand while accommodating new users … The proceeds of the tokens sold by [the Continuous token Model] will finance Decentraland over the long haul, perpetually aligning it with the prosperity of the network.“ In April 2020, the Decentraland Team announced the creation of the Decentraland Foundation (the “Foundation“), which today holds the intellectual property rights over and makes available the products and services, including virtual environment and tools, offered on the Decentraland platform. Meilich publicly stated that the distribution of the initial supply of MANA tokens issued at the time of the ICO would be as follows: 20 percent to the founding team, advisors, and early contributors: 20 percent to the Foundation; 40 percent to be available for purchase by the public; and 20 percent reserved to “incentivize early users, developers, and partners who want to build within Decentraland.” 173. As Meilich explained in his public blog post, “To incentivize value creation within Decentraland, extra tokens will be allocated to the [development team], organization, and a reserve to accelerate Community and Partner engagement.” 174. For example, Decentraland publicly issued a whitepaper (“Decentraland Whitepaper”) describing the architecture that would be built in the virtual reality platform and steps that would be taken to support Decentraland’s growth. It further made clear that the development of the platform was only beginning, and listed a number of “Challenges” that would need to be addressed in the development process in order for the platform to succeed. 175. Decentraland has continued to invest efforts in new developments and tools for the platform. According to Melich, even after the ICO, Decentraland was still “preparing a land allocation policy to ensure fair distribution, as well as a method for groups to purchase larger contiguous plots of land.” Since the ICO, Decentraland has developed tools for purported use on its platform (e.g., the “Marketplace” and “Builder” tools). In a public blog post published on March 19, 2018, the Decentraland team described the marketplace tool as the “first … in what will be a series of tools.” 176. Additionally, the Decentraland Whitepaper explained how the Foundation would “Foster[] the Network” in that it will “hold contests to create art, games, applications, and experiences, with prizes contingent on meeting a set of milestones. At the same time, new users will be assigned allowances, allowing them to participate in the economy immediately.” The Decentraland Whitepaper further claimed, “These financial incentives will help bootstrap the utility value of the network until it independently attracts users and developers.” 177. The Decentraland Whitepaper and website have also marketed that the protocol “burns” (or destroys) MANA tokens when used within the Decentraland ecosystem. 178. The Decentraland Whitepaper is still available on the Decentraland website. Continue Reading Here. About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings.
This court case retrieved on June 28, 2024, storage.courtlistener.com is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. SEC v. Consensys Software Inc. Court Filing, retrieved on June 28, 2024, is part of HackerNoon’s Legal PDF Series. You can jump to any part in this filing here. This part is 14 of 26. SEC v. Consensys Software Inc. Court Filing, retrieved on June 28, 2024, is part of HackerNoon’s Legal PDF Series . You can jump to any part in this filing here . This part is 14 of 26. HackerNoon’s Legal PDF Series here B. MANA 162. “MANA” is the digital token minted by Decentraland. Decentraland is a virtual reality platform that began development in June 2015 but was not made available to the public until its launch in February 2020. Decentraland was launched through an entity named Metaverse Holdings by a team of core individual developers: Ariel Meilich, Esteban Ordano, Manual Araoz, and Yemel Jardi. Decentraland operates on the Ethereum blockchain. According to Decentraland’s website, www.decentraland.org, Decentraland is a three-dimensional virtual reality platform, where users can create, experience, and monetize their content and applications. 163. According to Decentraland’s website, MANA serves as the crypto asset involved in all transactions in the Decentraland virtual reality ecosystem. On August 18, 2017, Decentraland held an initial coin offering in which MANA tokens were exchanged for ETH tokens, raising approximately $24.1 million. Currently, there is a total supply of approximately 2.19 billion MANA tokens. 164. Decentraland offered early contributors to the Decentraland ecosystem a discounted price when purchasing MANA. 165. From the time of its offering, MANA was offered and sold as an investment contract and therefore a security. 166. The price of all MANA tokens goes up or down together. 167. MANA has been available for buying and selling through MetaMask Swaps since at least October 2020. 168. The information Decentraland publicly disseminated would lead a reasonable investor, including those who have purchased MANA since October 2020, to view MANA as an investment. Specifically, MANA holders would reasonably expect to profit from Decentraland’s efforts to grow the Decentraland protocol because this growth would in turn increase the demand for and value of MANA. 169. Investor proceeds raised during the MANA ICO were pooled to fund the marketing, business expenses, and completion of the Decentraland platform. For instance, on July 5, 2017—a few weeks before the MANA ICO—Jardi published a blog post detailing Decentraland’s intended use of revenue from the token sale as follows: The blog post further explained that the “top priority“for use of the revenue was to develop a virtual world and that even after Decentraland was created, “the development budget will focus on the continued improvement of the end-user experience within the world browser“. The blog post further explained that the “top priority“for use of the revenue was to develop a virtual world and that even after Decentraland was created, “the development budget will focus on the continued improvement of the end-user experience within the world browser“. Indeed, Meilich explained in a separate blog post that after the ICO, Decentraland would implement a “Continuous Token Model,“ where it would increase the MANA supply by 8 percent in the first year, followed by a lower rate in subsequent years, to allow Decentraland to “regularly expand while accommodating new users … The proceeds of the tokens sold by [the Continuous token Model] will finance Decentraland over the long haul, perpetually aligning it with the prosperity of the network.“ Indeed, Meilich explained in a separate blog post that after the ICO, Decentraland would implement a “Continuous Token Model,“ where it would increase the MANA supply by 8 percent in the first year, followed by a lower rate in subsequent years, to allow Decentraland to “regularly expand while accommodating new users … The proceeds of the tokens sold by [the Continuous token Model] will finance Decentraland over the long haul, perpetually aligning it with the prosperity of the network.“ In April 2020, the Decentraland Team announced the creation of the Decentraland Foundation (the “Foundation“), which today holds the intellectual property rights over and makes available the products and services, including virtual environment and tools, offered on the Decentraland platform. Meilich publicly stated that the distribution of the initial supply of MANA tokens issued at the time of the ICO would be as follows: 20 percent to the founding team, advisors, and early contributors: 20 percent to the Foundation; 40 percent to be available for purchase by the public; and 20 percent reserved to “incentivize early users, developers, and partners who want to build within Decentraland.” In April 2020, the Decentraland Team announced the creation of the Decentraland Foundation (the “Foundation“), which today holds the intellectual property rights over and makes available the products and services, including virtual environment and tools, offered on the Decentraland platform. Meilich publicly stated that the distribution of the initial supply of MANA tokens issued at the time of the ICO would be as follows: 20 percent to the founding team, advisors, and early contributors: 20 percent to the Foundation; 40 percent to be available for purchase by the public; and 20 percent reserved to “incentivize early users, developers, and partners who want to build within Decentraland.” 173. As Meilich explained in his public blog post, “To incentivize value creation within Decentraland, extra tokens will be allocated to the [development team], organization, and a reserve to accelerate Community and Partner engagement.” 174. For example, Decentraland publicly issued a whitepaper (“Decentraland Whitepaper”) describing the architecture that would be built in the virtual reality platform and steps that would be taken to support Decentraland’s growth. It further made clear that the development of the platform was only beginning, and listed a number of “Challenges” that would need to be addressed in the development process in order for the platform to succeed. 175. Decentraland has continued to invest efforts in new developments and tools for the platform. According to Melich, even after the ICO, Decentraland was still “preparing a land allocation policy to ensure fair distribution, as well as a method for groups to purchase larger contiguous plots of land.” Since the ICO, Decentraland has developed tools for purported use on its platform (e.g., the “Marketplace” and “Builder” tools). In a public blog post published on March 19, 2018, the Decentraland team described the marketplace tool as the “first … in what will be a series of tools.” 176. Additionally, the Decentraland Whitepaper explained how the Foundation would “Foster[] the Network” in that it will “hold contests to create art, games, applications, and experiences, with prizes contingent on meeting a set of milestones. At the same time, new users will be assigned allowances, allowing them to participate in the economy immediately.” The Decentraland Whitepaper further claimed, “These financial incentives will help bootstrap the utility value of the network until it independently attracts users and developers.” 177. The Decentraland Whitepaper and website have also marketed that the protocol “burns” (or destroys) MANA tokens when used within the Decentraland ecosystem. 178. The Decentraland Whitepaper is still available on the Decentraland website. Continue Reading Here. Continue Reading Here . Here About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings. This court case retrieved on June 28, 2024, storage.courtlistener.com is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings. This court case retrieved on June 28, 2024, storage.courtlistener.com is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. storage.courtlistener.com

Decentraland's MANA Token Under SEC Scrutiny: Implications for Virtual Reality Investments

SEC v. Consensys Software Inc. Court Filing, retrieved on June 28, 2024, is part of HackerNoon’s Legal PDF Series. You can jump to any part in this filing here. This part is 5 of 26. DEFENDANTS 21. Consensys was founded in 2014. In June 2020, Consensys was incorporated in Delaware. OTHER RELEVANT ENTITIES 22. Lido Finance (“Lido”) is a Cayman Islands company. Lido operates a program for staking on the Ethereum blockchain. Lido launched its staking program in December 2020. 23. Rocket Pool is headquartered in Australia. Rocket Pool also operates a program for staking on the Ethereum blockchain. Rocket Pool launched its staking program in October 2021. Continue Reading Here. About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings.
This court case retrieved on June 28, 2024, storage.courtlistener.com is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. SEC v. Consensys Software Inc. Court Filing, retrieved on June 28, 2024, is part of HackerNoon’s Legal PDF Series. You can jump to any part in this filing here. This part is 5 of 26. SEC v. Consensys Software Inc. Court Filing, retrieved on June 28, 2024, is part of HackerNoon’s Legal PDF Series . You can jump to any part in this filing here . This part is 5 of 26. HackerNoon’s Legal PDF Series here DEFENDANTS 21. Consensys was founded in 2014. In June 2020, Consensys was incorporated in Delaware. OTHER RELEVANT ENTITIES 22. Lido Finance (“Lido”) is a Cayman Islands company. Lido operates a program for staking on the Ethereum blockchain. Lido launched its staking program in December 2020. Lido Finance (“Lido”) 23. Rocket Pool is headquartered in Australia. Rocket Pool also operates a program for staking on the Ethereum blockchain. Rocket Pool launched its staking program in October 2021. Rocket Pool Continue Reading Here. Continue Reading Here . Here About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings. This court case retrieved on June 28, 2024, storage.courtlistener.com is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings. This court case retrieved on June 28, 2024, storage.courtlistener.com is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. storage.courtlistener.com

Major Crypto Players Consensys, Lido, and Rocket Pool Under SEC Scrutiny

USA v. Samuel Bankman-Fried Court Filing, retrieved on March 15, 2024 is part of . You can jump to any part in this filing . This part is 10 of 33. HackerNoon’s Legal PDF Series here A. Use of Signal to Auto-Delete Messages At trial, the evidence established that the defendant instructed employees to use Signal, an end-to-end encrypted messaging application, with an auto-delete feature enabled so as to prevent regulators from reviewing communications. Specifically, Adam Yedidia testified that the defendant instructed employees to use Signal with a feature enabled that would automatically delete each message after a certain amount of time had elapsed since the message was sent. (Tr. 175). Bankman-Fried stated that “it was all downside for messages to be kept around” because “if regulators found something they didn’t like in those messages, that could be bad for the company.” (Tr. 176). Similarly, Ellison testified that the defendant “directed [them] to use the disappearing messaging setting on [their] Signal, meaning that all messages [they] sent in these conversations would disappear after seven days.” (Tr. 825). Bankman-Fried said that FTX and Alameda employees “should be very careful about what [they] put in writing” because “putting things in writing was one of the primary ways that financial firms got in legal trouble.” (Id.). After those directives, FTX and Alameda employees increasingly used Signal messages for “sensitive” communications. (Tr. 825-26). Government Exhibit 1083 is a chart of all of the Signal chats on Wang’s device that were set to auto-delete. The chart shows that many of the chats’ auto-delete function was set by the defendant. Continue Reading . Here About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings. This court case retrieved on March 15, 2024, from is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. storage.courtlistener

SBF Directed Employees to Use the Auto-Delete Signal App Future to Avoid Regulatory Scrutiny

3 Simple Tips For Dependency Injection Using Scrutor in C#

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The United States v Meta Platforms Court Filing October 24, 2023 is part of . You can jump to any part in this filing . This is part 43 of 100. HackerNoon’s Legal PDF Series here X. META CONTINUES TO EXPAND AND INTRODUCE NEW PLATFORMS 836. Meta has indicated [Redacted] that it plans to expand its presence in the Virtual Reality (VR) arena. 837. Virtual Reality is a new way to interact with computers wherein a user’s body is virtually placed into a 3D digital world that they can control by moving their body as though in the real world. 838. Meta first ventured into virtual reality when, in 2014, it purchased VR headset manufacturer Oculus. Meta has since developed a flagship VR Social Media Platform called “Horizon Worlds.” 839. In May 2022, the organization SumOfUs (now called Eko), released a report documenting the harms it found on Horizon Worlds, including harassment and abuse. 840. On March 8, 2023, the Center for Countering Digital Hate published a report about bullying, sexual harassment of minors, and harmful content on Horizon Worlds. 841. As of April 2023, Meta made Horizon Worlds available to young users between the ages of 13 to 17. 842. The Filing States have attempted to investigate Meta’s actions in the VR space, specifically by issuing Civil Investigative Demands on June 7, 2023, requesting information about minors on Horizon Worlds, including users under age 13. 843. To date, Meta has not responded to the Filing States’ requests for information and documents on this topic. 844. Upon information and belief, Meta is developing and deploying new features on its nascent virtual reality Platforms such as Horizon Worlds, which users may link to their accounts on Facebook and Instagram. 845. Upon information and belief, Meta’s conduct in the VR space may create harm to minors such that it constitutes violations of states’ consumer protection laws and yield further violations under COPPA. Continue Reading . Here About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings. This court case 4:23-cv-05448 retrieved on October 25, 2023, from is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. Washingtonpost.com

On Virtual Harassment: Meta's VR Expansion Faces Regulatory Scrutiny 

SEC v. Binance Court Filing, retrieved on June 5, 2023 is part of . You can jump to any part in this filing . This is part 21 of 69. HackerNoon’s Legal PDF Series here FACTS III. UNDER ZHAO’S CONTROL, BINANCE PROVIDED EXCHANGE, BROKERDEALER, AND CLEARING AGENCY SERVICES TO U.S. INVESTORS THROUGH THE BINANCE.COM PLATFORM. E. Zhao and Binance Actively Solicited Investors in the United States to Trade Crypto Assets on the Binance.com Platform. i. Binance Marketed its Services Worldwide, Including Specifically to U.S. Customers. 104. At least since the launch of the Binance.com Platform in 2017, Binance has regularly solicited customers in the United States—at first overtly and later furtively—to transact in crypto asset securities. Throughout, it has held itself out as being in the business of effecting transactions in many different crypto assets offered and sold as securities. It has engaged in this solicitation on a worldwide basis, including through its website, blog posts, and social media. 105. Among other things, Binance’s website has solicited “investors” and “traders” to “buy and sell crypto in minutes,” inviting them to “Trade. Anywhere.” Binance advertises the Binance.com Platform on its social media accounts, including on Facebook, Twitter, and Reddit, where it collectively has over 12 million followers, many of whom reside in the United States. 106. From the Binance.com Platform’s launch until at least September 2019, Binance overtly marketed its services to all customers and imposed no restrictions whatsoever on the ability of U.S. persons to buy, sell, and trade crypto assets on the Binance.com Platform. During this period, Binance opened tens of thousands of accounts for customers who submitted “Know Your Customer” (“KYC”) identity verification information that indicated they were based in the United States or who accessed the platform via Internet Protocol (“IP”) addresses indicating that they were physically located in the United States. Binance, and Zhao as its control person, knew that U.S. persons transacted on the Binance.com Platform. 107. In addition, until at least August 2021, Binance did not require customers whose accounts were limited to withdrawing two bitcoin per day to submit any KYC information, allowing those investors to bypass well-recognized international anti-money laundering restrictions and disclosures when seeking to open accounts on the Binance.com Platform. 108. Zhao and Binance regularly tracked customer activity on the Binance.com Platform and were thus aware that U.S. customers made up a substantial portion of Binance’s business. For example, in an August 2019 internal presentation, Binance estimated that the Binance.com Platform had over 1.47 million customers in the United States. 109. Moreover, by 2019, Binance had over 3,500 U.S. customers who were largevolume traders that Binance referred to as “VIPs.” These U.S. customers were important to Binance not only because they directly produced substantial revenues, but also because they provided substantial liquidity on the Binance.com Platform, which in turn encouraged other investors to trade on the platform. ii. Zhao and Binance Developed a Plan to Evade U.S. Legal Scrutiny While Continuing to Profit from U.S. Investors. 110. Zhao and Binance understood that they were operating the Binance.com Platform in violation of numerous U.S. laws, including the federal securities laws, and that these ongoing violations presented existential risks to their business. 111. As Binance’s CCO bluntly admitted to another Binance compliance officer in December 2018, (Emphasis added.) “we are operating as a fking unlicensed securities exchange in the USA bro.” 112. In 2018, Zhao and Binance hired several advisors to advise them on managing their U.S. legal exposure. One of these advisors was a consultant who operated a crypto asset trading firm in the United States (“Binance Consultant”). In November 2018, the Binance Consultant proposed a plan to Zhao and Binance that involved the creation of a U.S. entity, which the Binance Consultant at the time dubbed the “Tai Chi” entity (“Tai Chi Plan”). 113. In presentations shared with Zhao and other Binance senior officials in November 2018, the Binance Consultant warned against Binance continuing the “status quo” of unrestricted U.S. customer access to the Binance.com Platform, dubbing this a “high” risk due to potential U.S. “regulatory actions,” including actions by the SEC with respect to the “[i]ssuance of BNB to US Persons” and “for [operating an] unregistered securities brokerage.” 114. The Binance Consultant then discussed two alternative approaches for Zhao and Binance to consider. First, he discussed what he described as a “low” risk approach of “[a]ctive outreach to regulators and resolve all potential issues,” but ultimately advised against this approach because, among other things, “settlement costs can be substantial” and could result in the “complete loss of the US market during the settlement process.” 115. Second, the Binance Consultant described a “moderate” risk approach in which Binance would establish a U.S. entity—the Tai Chi entity—that “will become the target of all built-up enforcement tensions,” “ , and built-up enforcement tensions,” and The Binance Consultant recommended that Zhao and Binance adopt this approach, known as the Tai Chi Plan. reveal, retard resolve “[i]nsulate Binance from legacy and future liabilities.” 116. To implement the Tai Chi Plan, the Binance Consultant recommended that Binance brand a U.S. entity a Binance entity through a “franchise model” that would rely on Binance’s technology “by visualizing Binance as a technology vendor.” 117. He further recommended that Binance provide liquidity and market access from the Binance.com Platform to the proposed U.S. crypto asset platform established by the Tai Chi entity “through either affiliated . . . or contracted market makers.” 118. The Binance Consultant touted this approach as both “maintaining functional access to the US market,” and providing “[l]icense and services fees paid by the US Service Company to Binance” that “are functionally US-sourced trading fees.” 119. As another benefit to Binance, the Binance Consultant further recommended that Binance use the Tai Chi entity’s OTC trading services to provide “functional fiat capacity” – i.e., Binance could serve as an OTC counterparty on the U.S. platform to sell crypto assets for fiat currency, thereby giving Binance ready access to fiat currency without having to separately establish a bank account. 120. In addition, the Binance Consultant recommended steps to “insulate Binance from US Enforcement.” Those steps included having “[k]ey Binance personnel continue to operate from non-US locations to avoid enforcement risk” and ensuring that “[c]ryptocurrency wallets and key servers continue to be hosted at non-US locations to avoid asset forfeiture.” 121. As to the SEC, the Binance Consultant also recommended that, ” the Tai Chi entity should “release a long and detailed Howey Test Asset-Evaluation Framework … to show Howey test sophistication” and then engage with the SEC to discuss the “formation or acquisition of a broker/dealer or alternative trading system (ATS), (Emphasis added.) “just for publicity, with no expectation of success and solely to pause potential enforcement efforts.” 122. The Binance Consultant also recommended that Binance take steps to “reduce the attractiveness of enforcement” by U.S. regulators concerning the Binance.com Platform. This included publicly “restrict[ing] US persons’ access to the main Binance site” while privately encouraging U.S. customers to bypass these restrictions through the “strategic treatment” of virtual private networks (“VPNs”) that would disguise their locations and thereby “minimize [the] economic impact” of Binance’s public proclamations that it was prohibiting U.S investors on the platform. 123. Longer term, the Binance Consultant recommended the “[e]ventual integration with Binance” by “acquir[ing] the US operation at a nominal price and re-arrang[ing] its leadership when it has served its purposes.” 124. After considering the Tai Chi Plan, Zhao informed the Binance Consultant that Binance had also talked to U.S. law firms that proposed “a more conservative approach” that was “probably safer for now.” But Zhao made clear that he would “still very much like to continue to work with” the Binance Consultant, explaining, “There are elements from both of your proposals[] we may combine.” Zhao further noted that “having [a U.S. law firm] behind us reduces the personal exposure you take on as well.” Finally, Zhao emphasized to the Binance Consultant that they “should work together as a team.” iii. Consistent with the Tai Chi Plan, Binance Encouraged and Assisted U.S. Customers to Circumvent Binance’s Supposed Restrictions. 125. In fact, Binance implemented much of the Tai Chi Plan. In addition to creating BAM Trading and the Binance.US Platform, Zhao and Binance implemented policies and controls to give the impression that the Binance.com Platform was blocking U.S. customers while at the same time secretly subverting those controls. 126. On June 14, 2019, Binance updated the Binance.com Platform’s “Terms of Use” to provide—for the first time—that U.S. customers were not permitted to trade on the Binance.com Platform. Binance further announced that it would begin implementing measures to block U.S. customers from trading or depositing assets on the platform after 90 days. Zhao and Binance timed this announcement to coincide with its announcement that an ostensibly independent U.S. entity, BAM Trading, would soon launch the Binance.US Platform. 127. But Zhao and Binance were unwilling to risk losing all of Binance’s U.S business—particularly its VIP U.S. customers—on the well-established and more liquid Binance.com Platform. And so Zhao and Binance engaged in widespread covert efforts to permit U.S. customers to continue to trade on the platform. 128. First, Zhao directed Binance to implement a plan to encourage customers to circumvent Binance’s geographic blocking of U.S.-based IP addresses by using a VPN service to conceal their U.S. location. Second, Zhao directed Binance to encourage certain U.S.-based VIP customers to circumvent the new KYC restrictions by submitting updated KYC information that omitted any U.S. nexus. 129. As Zhao explained in a June 9, 2019 weekly meeting of senior Binance officials: We don’t want to lose all the VIPs which actually contribute to quite a large number of volume. So ideally we would help them facilitate registering companies or moving the trading volume offshore in some way—in a way that we can accept without them being labeled completely U.S. to us. 130. Binance implemented Zhao’s instructions. On or about June 13, 2019, a Binance employee who belonged to a team that managed VIP customers messaged Zhao and other senior Binance officials, “We contacted 16 US top clients so far, some [of] them already have offshore entity, they said they can underst[and] and they are happy that we can get ahead of that.” A few days later, Binance’s Chief Marketing Officer reported that the team had reached out to the top 22 U.S. VIP customers and that 19 had “already agreed to change KYC, or change their IP.” 131. With respect to its thousands of other VIP U.S. customers, Zhao explained in a June 24, 2019 meeting with other Binance senior officials: We do need to let users know that they can change their KYC on Binance.com and continue to use it. But the message, the message needs to be finessed very carefully because whatever we send will be public. We cannot be held accountable for it. 132. The following day, Zhao met with other senior Binance officials to discuss their VIP U.S. customers, and Zhao provided further instructions on crafting the message to customers about changing IP addresses or KYC documentation. During the meeting, the Binance CCO noted that Binance would engage in “the international circumvention of KYC,” and Zhao affirmed that his “goal” was “to reduce the losses to ourselves, and at the same time to make the U.S. regulatory authorities not trouble us.” 133. To that end, the Binance CCO drafted a “VIP Handling” document, dated June 26, 2019, which included draft emails to send to VIP customers who were identified as having U.S. KYC documents or U.S. IP addresses, along with instructions to Binance employees about messaging to customers. For customers with U.S. KYC documents, the “VIP Handling” document instructed Binance employees to make sure the U.S. customers opened new accounts “with no US documents allowed” and to inform the customer “to keep this confidential.” 134. For customers with U.S. IP addresses, the “VIP Handling” document instructed Binance employees to “[i]nform [the] user that the reason why he/she can’t use our www.binance.com is because his/her IP is detected as US IP; if user doesn’t get the hint, indicate that IP is the sole reason why he/she can’t use .com.” The document further instructed Binance employees not to “explicitly instruct user to use different IP. We cannot teach users how to circumvent controls. If they figure it out on their own, it[’]s fine.” 135. Binance continued to circumvent these controls for several years. On February 12, 2020, for example, a Binance employee asked the Binance CCO whether it was still a “hard requirement” for Binance to block U.S. customers, and the Binance CCO replied: 136. Similarly, on July 15, 2020, a Binance VIP customer team member asked the Binance CCO how they could onboard a large U.S. customer. The Binance CCO replied, “[T]he best way I can think of is to onboard with US exchange … but we let them trade on .com through a special arrangement.” He further explained, “[W]e ask them to onboard with US, and then if their volume is really very big … we will push hard on .com side to accept it on an exceptional basis … we always have a way for whales … either we do it, or [a competitor crypto trading platform] does it.” (“Whales” is a market term referring to large volume investors.) 137. The Binance CCO further admitted, “CZ will definitely agree to this lol … I have been briefed by top management to always find a way to support biz.” 138. Moreover, despite statements about its compliance efforts, Binance did not even require all customers to submit KYC documents until after August 2021. Around that time, Binance had over 62 million worldwide customers, but only approximately 25 million had submitted KYC documentation. Thereafter, more Binance.com Platform customers began submitting KYC documentation, but Binance continued to have large numbers of customers that still had not done so at least through mid-2022. 139. Binance’s plan to retain lucrative U.S. investors while pretending to restrict them was a success. For example, a March 2020 internal Binance presentation reported that the Binance.com Platform still had approximately 159 U.S. VIP customers, representing almost 70 percent of all global VIP trading volume. Similarly, in May 2021—two years after the launch of the Binance.US Platform—an internal Binance presentation reported that U.S. VIP customers still accounted for over 63 percent of the Binance.com Platform’s VIP customer trading volume. 140. U.S. customer trading volume on the Binance.com Platform included substantial activity trading in crypto asset securities. For example, between January 2019 and September 2021, over 47,000 U.S. investors traded in BNB on the Binance.com Platform. Continue Reading . Here About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings. This court case 1:23-cv-01599 retrieved on September 6, 2023, from is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. docdroid.net

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DOE vs. Github (amended complaint) Court Filing (Redacted), June 8, 2023 is part of . You can jump to any part in this filing . This is part 13 of 38. HackerNoon’s Legal PDF Series here VII. FACTUAL ALLEGATIONS A. Introduction 47. This class action against Defendants concerns an OpenAI product called Codex and a GitHub product called Copilot. 48. OpenAI began development of Codex sometime after OpenAI was founded in December 2015 and released Codex on a limited basis in August 2021. 49. GitHub began development of Copilot sometime in 2019, released it on a limited basis in June 2021, and released it as a paid subscription service in June 2022. 50. Codex and Copilot are assistive AI-based systems offered to software programmers. These AI systems are each trained on a large corpus of publicly accessible software code and other materials, including all the Licensed Materials. Defendants describe these products as making coding easier by accepting a code “prompt” from a programmer and emitting a possible completion of that code, which is referred to herein as Output, as set forth above. Defendants claim Codex and Copilot do not retain copies of the materials they are trained on. In practice, however, the Output is often a near-identical reproduction of code from the training data. 51. Codex and Copilot are related. Copilot is a joint venture between GitHub and OpenAI. Codex is a standalone product released by OpenAI that also “powers GitHub Copilot, which [OpenAI] built and launched in partnership with GitHub.”[5] “GitHub Copilot uses the OpenAI Codex to suggest code and entire functions in real-time, right from your editor.”[6] The version of Codex used to power Copilot is modified from OpenAI’s standalone version. Defendants have kept secret the details of Codex’s modifications and its integration into or interaction with Copilot. [5] See . https://openai.com/blog/openai-codex/ [6] See . https://github.com/features/copilot/ Continue Reading . Here About HackerNoon Legal PDF Series: We bring you the most important technical and insightful public domain court case filings. This court case 4:22-cv-06823-JST retrieved on August 26, 2023, from is part of the public domain. The court-created documents are works of the federal government, and under copyright law, are automatically placed in the public domain and may be shared without legal restriction. Storage Courtlistener

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