Did BAM Trading Really Stop Manipulative Trading on Binance.US, or Was It All Talk?

FACTS

VI. BAM TRADING AND BAM MANAGEMENT ENGAGED IN ACTS AND PRACTICES THAT OPERATED AS A FRAUD AND DECEIT UPON, AND MADE FALSE AND MISLEADING STATEMENTS TO, INVESTORS.

A. BAM Trading and BAM Management Touted Their Prohibition of Manipulative Trading on the Binance.US Platform to Investors.

244. Since the Binance.US platform launched in September 2019, customers, including retail investors, have had to agree that they have read and accept the platform’s “Terms of Use.” The Terms of Use in turn require customers to review the BAM Platform “Trading Rules” before they can trade on the Binance.US platform, and since 2019, BAM Trading has publicly posted the “BAM Platform Trading Rules” on the Binance.US website.

245. These Trading Rules include a section entitled, “False Trading and Market Manipulation Prohibited,” which provides that “[t]raders are prohibited from engaging in Market Manipulation” and defines “Market Manipulation” as “any action taken or procured to be taken, or any course of conduct … which is intended to, or does, or is likely to, create a false or misleading appearance of active trading in any Digital Asset on the BAM Platform; or artificially control or manipulate the price or trading volume of a Digital Asset.”

246. From the inception of the Binance.US Platform, BAM Trading and BAM Management in other ways publicly touted their supposed efforts to monitor and prevent manipulative trading. For example, during a public CoinDesk webinar in November 2019, BAM CEO A was asked how the Binance.US Platform spot market was monitored and how manipulative activity was excluded. She responded that BAM Trading had “on-chain analytics, monitoring all the behaviors that are taking place” on the Binance.US Platform and could see “the behavior of our trading that’s taking place.” She further stressed that BAM Trading’s onchain analytics had “really clear sets and risk parameters that we’re able to make sure we’re not … you know, welcoming behavior that’s going to be toxic.”

247. Similarly, between at least September 2021 and April 2022, when soliciting investors (“Equity Investors”) during a seed funding round offering equity in BAM Management, BAM Trading and BAM Management falsely touted the trade surveillance and other measures purportedly in place on the Binance.US Platform to detect and prevent manipulative trading. BAM Trading and BAM Management raised at least $200 million selling preferred shares to Equity Investors, including almost $40 million from six investors in the United States.

248. For example, in a September 2021 “Seed Round Pitch Deck” (the “Pitch Deck”) provided to Equity Investors, BAM Management and BAM Trading touted the Binance.US Platform’s supposedly robust “trade surveillance.” The Pitch Deck further identified the numerous vendors that BAM Trading had engaged to supposedly “deploy[] human intelligence” and “artificial intelligence” to “ensure the highest level of compliance” on the Binance.US Platform. The Pitch Deck further described the role of a third-party provider of trade surveillance software for crypto asset platforms (“Trade Surveillance Company A”) as providing “[t]rade surveillance, market manipulation, and transaction monitoring.”

249. In a “Trade Surveillance Manual” dated July 2021 also provided to Equity Investors, BAM Trading and BAM Management falsely described active surveillance of the Binance.US Platform supposedly conducted by an internal team using Trade Surveillance Company A software, which purportedly allowed for monitoring and other trade data analytics. The Trade Surveillance Manual stated that Trade Surveillance Company A’s “real-time” and “T+1” monitoring of trading activity enabled the platform to prevent market manipulation, identify abusive trading practices prohibited by the platform’s trading rules, and conduct monthly reviews of “all potential Wash Trades.”