FTC v. Binance Court Filing, retrieved on March 27, 2023, is part of HackerNoon’s Legal PDF Series. You can jump to any part in this filing here. This is part 19 of 31.
V. FACTS
K. Binance Has Relied On “Brokers” to Introduce Customers to the Binance Platform Without Effective Access Controls
141. During the Relevant Period, Binance implemented a “broker program” pursuant to which third parties introduce customers to the Binance platform. Binance did not have effective controls in place—beyond Binance’s own ineffective access controls—to ensure these brokers did not permit their own customers to access Binance from the United States or any other “restricted” jurisdiction during the Relevant Period.
142. The participants in Binance’s broker program include “exchange brokers” that allow their customers to transmit orders directly into Binance spot and derivatives markets. In addition, during the Relevant Period Binance has relied on “prime brokers” to solicit and accept orders for Binance’s digital asset derivatives from institutional customers, including those located in the United States.
143. While Binance’s Terms of Use state that a “Binance Account can only be used by the account registrant,” Binance does not uniformly enforce this provision. During the Relevant Period, Binance has knowingly allowed at least two “prime brokers” to open “sub-accounts” through which U.S. customers have and continue to trade digital asset derivatives on the Binance platform.
144. Prime Broker A is a British Virgin Islands entity. Its CEO resides and works in New York and its sales force includes personnel that reside and work in the United States.
145. Prime Broker A’s customers include institutional market participants that are located in the United States. Prime Broker A holds a “main account” on Binance. For each of its customers, Prime Broker A opens one or more new “sub-accounts” on Binance under Prime Broker A’s “main account.” Binance does not collect any identity-verifying documentation when Prime Broker A opens up new “sub-accounts” on behalf of its customers or otherwise
attempt to learn the identity of Prime Broker A’s customers.
146. Prime Broker A’s U.S.-based customers transmit orders to Binance directly through API connections that Binance attributes to Prime Broker A. Binance is aware that Prime Broker A allows its customers to trade on Binance through Prime Broker A’s “sub-accounts.”
147. Prime Broker B is an entity organized under the laws of Malta. Prime Broker B’s CEO resides and works in California and Prime Broker B’s sales force includes personnel that reside in the United States.
148. Prime Broker B holds a “main account” on Binance. For each of its customers, Prime Broker B opens one or more new “sub-accounts” on Binance under its “main account.” Binance does not collect any identity-verifying documentation when Prime Broker B opens up new “sub-accounts” on behalf of its customers or otherwise attempt to learn the identity of Prime Broker B’s customers.
149. Prime Broker B’s customers include institutional market participants that are
located in the United States, including Trading Firm A. Binance is aware that Prime Broker B
allows its customers to trade on Binance through Prime Broker B’s “sub-accounts.”
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This court case 1:23-cv-01887 retrieved on September 4, 2023, from docdroid.net 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.