SEC Investigation Unveils False Reporting of Trading Volume on Binance.US

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.

250. Since the launch of the Binance.US Platform, BAM Trading and BAM Management have also defrauded the investing public about the reliability of trading volume figures reported for the Binance.US Platform.

251. Since the launch of the platform, BAM Trading publicly reported volume on a token-by-token basis and made aggregate Binance.US Platform trading volume publicly available without any qualifications as to its legitimacy. BAM Trading has provided Binance.US Platform trading volume through various public resources that are popular for crypto asset investors when deciding which crypto asset to trade in and where to conduct their trading. These include the market data API and the Binance.US Platform and its website.

252. For example, on April 3, 2022, the market data API indicated that the trading volume of TRX, a crypto asset security listed on the platform, was 5,902,367. That information would have also been posted on the Binance.US Platform and the company’s website, as both pull from the same data as the API.

253. BAM Trading also made the platform’s trading volume data available through the API for reporting and dissemination by data aggregators such as CoinMarketCap and CoinGecko, which are popular information resources for crypto asset investors.

254. BAM Trading sought to have the Binance.US Platform’s trading volumes included on CoinMarketCap because it knew that crypto asset investors look to CoinMarketCap for information on specific crypto assets and where they can be traded. Accordingly, BAM Trading ensured ongoing information regarding trading volume was available for publication on a token-by-token and aggregate basis, and BAM Trading monitored the posted information, at times communicating with CoinMarketCap to correct certain information reported to the market. Since in or around April 2020, Zhao has owned CoinMarketCap through a Binance affiliate.

255. BAM Trading also reported the platform’s trading volume on social media. As an example, on November 1, 2019, BAM Trading tweeted that the Binance.US Platform had “$30M in 24hr Volume.” Similarly, on January 8, 2021, BAM CEO A tweeted that the platform’s total trading volume was “$500M.” 256. In addition, from September 2021 through at least April 2022, BAM Trading and BAM Management touted the Binance.US Platform’s trading volume when soliciting the Equity Investors. In the Pitch Deck, BAM Trading and BAM Management reported, with respect to the Binance.US Platform, “$24B” in average monthly trading volume, “$205B” in trading volume to date, and favorable trading volume comparisons to the Binance.US Platform’s competitors.

257. The Pitch Deck also boasted trade volume statistics for the period of time leading up to BAM Trading’s and BAM Management’s September 2021 outreach to Equity Investors. For example, it highlighted that the Binance.US Platform’s August 2021 trading volume was “5x larger than FTX.US and ~24% of Coinbase’s global volumes.”

258. BAM Management and BAM Trading also provided Equity Investors with access to a data room that contained a voluminous spreadsheet with data on the Binance.US Platform’s trading volume, including monthly data for various crypto assets made available for trading on the Binance.US Platform (“Volume Data Spreadsheet”). The Volume Data Spreadsheet reported, for example, the monthly trading volumes of one crypto asset security called “ALGO” for June through August 2021 to be over $137 million. Similarly, for another crypto asset security called “MANA,” the Volume Data Spreadsheet reported over $102 million in volume for June through August 2021.