Under CZ's Control, Binance Operated in the U.S without Proper Registration

FACTS

III. UNDER ZHAO’S CONTROL, BINANCE PROVIDED EXCHANGE, BROKERDEALER, AND CLEARING AGENCY SERVICES TO U.S. INVESTORS THROUGH THE BINANCE.COM PLATFORM.

80. In 2017, Binance, controlled by Zhao, launched the Binance.com Platform to provide services to crypto asset investors. To finance its start-up costs, Zhao and Binance created a new crypto asset security called “Binance Coin,” also known as “BNB.”

81. From approximately June 26 to July 3, 2017, Zhao and Binance conducted a socalled ICO of BNB that raised approximately $15 million from investors globally, including U.S. investors, by selling 100 million BNB tokens at an average price of $0.15 per token. As of May 14, 2023, BNB traded as high as $314.70.

82. From inception, as set forth in greater detail in Section VII.A below, BNB was offered and sold as a security because Binance touted an investment in BNB as an investment in Binance’s efforts to create a successful crypto asset trading platform centered around BNB. For example, to promote the BNB ICO, Binance published a “Binance Exchange” whitepaper (the “Binance Whitepaper”) announcing Binance’s ambition to build “a world-class crypto exchange, powering the future of crypto finance,” in which BNB would play an integral role as a so-called “exchange token”—i.e., a crypto asset associated by its issuer with a crypto asset trading platform that the issuer markets as an investment in the success of the platform itself.

83. Central to the Binance Whitepaper’s proposal was the “Binance Exchange Matching Engine” that would match crypto asset buy and sell orders and be “capable of sustaining 1,400,000 orders/second, making Binance one of the fastest exchanges in the market.”

84. In July 2017, shortly after completion of the BNB ICO, Zhao and Binance launched the Binance.com Platform.

85. Since Binance’s inception, Zhao has been Binance’s CEO and its ultimate decision maker. All Binance employees directly or indirectly report to him. He had and continues to have the ability to exercise control—and does in fact exercise such control—over all aspects of Binance’s business, including its operation of the Binance.com Platform, and he directs and oversees the platform’s various functions and services.

86. From the time it launched the Binance.com Platform, Binance, under Zhao’s control, has acted as an exchange, clearing agency, and broker-dealer in crypto asset securities without registering in those capacities.