Page 1 UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SECURITIES AND EXCHANGE
COMMISSION,
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Plaintiff,
v.
BINANCE HOLDINGS LIMITED,
BAM TRADING SERVICES, INC.,
BAM MANAGEMENT US HOLDINGS,
INC., and CHANGPENG ZHAO,
Defendants.
Civil Action No. 1:23-cv-01599-ABJ
[PROPOSED] STIPULATION AND CONSENT ORDER
Pursuant to Section 21(d) of the Securities Exchange Act of 1934 and Section 20(b) of
the Securities Act, and in order to preserve the status quo, Plaintiff Securities and Exchange
Commission (“Commission” or “SEC”) and Defendants Binance Holdings Limited
(“Binance”), BAM Trading Services, Inc. (“BAM Trading”), Changpeng Zhao (“Zhao”), and
BAM Management US Holdings, Inc. (“BAM Management,” together with Binance, BAM
Trading, Zhao, the “Stipulating Defendants,” and together with the SEC the “Stipulating
Parties”), hereby stipulate and consent, without a hearing, to the Court’s entry of this Stipulation
and Consent Order (“Consent Order”) as set forth below pending the Court’s final adjudication
of this matter or until further order of the Court.
The Stipulating Parties agree and the Court finds that the Court has jurisdiction over the
subject matter of this action, and that venue properly lies in this District.
Accordingly, based on the agreement of the Stipulating Parties and for good cause
shown, and subject to the protective order to be entered in this case, it is hereby Page 2 ORDERED:
I.
On or before the date the Court issues this Consent Order, the Stipulating Defendants
shall repatriate to the United States, transfer to BAM Trading, and confirm that BAM Trading
maintains possession, custody and control in the United States of all fiat currency and crypto
assets that are deposited, held, traded, or accrued by customers, including affiliated and nonaffiliated liquidity providers (hereinafter referred to as “Customers”) on the crypto trading
platform commonly known as “Binance.US” or otherwise held for the benefit of BAM Trading
or BAM Management Customers, including, but not limited to, those assets associated with
BAM Trading’s staking-as-a-service program, “Private and Administrative Keys,” (which are
defined as such keys and any portion or copy thereof, any devices, hardware, and/or software
managing such keys and any portion or copy thereof), the ledger device described in the SEC’s
memorandum of law (Docket No. 8-2), and the root access associated with the Amazon Web
Services account(s) for the Binance.US Platform), and any hardware crypto asset wallets
(hereinafter referred to as “Customer Fiat Assets” or “Customer Crypto Assets” and,
collectively, “Customer Assets”), except as otherwise specified in this Consent Order. The term
“Customer Assets” includes any New Private and Administrative Keys as defined in II.2 of this
Consent Order. For the avoidance of doubt, U.S.-based personnel for BAM Trading and BAM
Management will have complete control over Customer Fiat Assets and Customer Crypto
Assets, including assets associated with BAM Trading’s staking-as-a-service program, all
Private and Administrative Keys and New Private and Administrative Keys, that control any
wallets, staking operations, and/or any withdrawals, transfers, or movement of assets, except as
otherwise specified in this Consent Order. Nothing in this paragraph will prevent BAM Trading Page 3 from relying on non-affiliated third-party custodians located within the United States to provide
custody and related services.
II.
IT IS FURTHER ORDERED that on or before the date the Court issues this Consent
Order, Stipulating Defendants will, through their officers and employees or a non-affiliated third
party custodian within the United States, ensure, and each confirm to counsel of record for the
SEC, that BAM Trading and BAM Management obtain and maintain sole possession, custody,
and control of all Customer Assets and can transfer them solely for purposes set forth in this
Consent Order, and subject to the other provisions of this Consent Order, and all transfers and
withdrawals of Customer Assets will solely be under the direction and control of BAM Trading
and BAM Management, through officers and employees located in the United States, or a nonaffiliated third party custodian located in the United States;
1.
IT IS FURTHER ORDERED that BAM Trading and BAM Management will
not provide possession, custody, or control over Customer Assets to any individual or entity,
including Binance, Zhao, and, with the exception of BAM Trading and BAM Management, any
individual or entity with any affiliation, agreement, or other relationship with Binance, Zhao, or
any Zhao- owned or -controlled entity (these individuals and entities collectively, “Binance
Entities”). BAM Trading and BAM Management, including their officers and employees, will
remove and not designate any of the Binance Entities as an administrator, account holder or
signatory of, or otherwise having any authority to transfer or withdraw from, any account or
wallet holding Customer Assets, without first obtaining leave of the Court. Further, Stipulating
Defendants including their employees or agents, will delete or destroy, and will ensure the
Binance Entities delete or destroy, any existing copies of Private and Administrative Keys Page 4 and/or effect the immediate dissolution of any existing formal or informal agreements (whether
written or verbal) for the control, exercise of control, or transfer of Private and Administrative
Keys or Customer Assets, that would facilitate or permit any transactions or actions contrary to
this Consent Order’s requirement that Customer Assets be held solely by BAM Trading and
BAM Management in the United States and may be transferred solely for the purposes set forth
in this Consent Order. This paragraph does not limit BAM Trading’s ability to provide
customers other than the Binance Entities with possession, custody, or control over their own
Customer Assets or rely on non-affiliated third-party custodians in the United States to provide
custody and related services for Customer Assets.
2.
IT IS FURTHER ORDERED that within 14 days of entry of the Consent
Order, BAM Trading and BAM Management will begin to establish new wallets, and
Stipulating Defendants will begin to transfer all Customer Crypto Assets to the new wallets with
new private and administrative keys. These “New Private and Administrative Keys” (which are
defined as such keys and any portion or copy thereof, any devices and/or software managing
such keys, and any portion or copy thereof for the new wallets) will be in the sole possession,
custody, and control of BAM Trading officers and employees who are located in the United
States. These New Private and Administrative Keys, will not be provided to or in any way
shared with the Binance Entities. BAM Trading shall confer with counsel of record for the SEC
regarding a reasonable timeline for completing this work and will provide them with the
addresses for all new wallets holding Customer Assets, both hot and cold, and will identify the
specific crypto asset(s) held within each wallet.
3.
IT IS FURTHER ORDERED that for the pendency of this litigation Defendants
BAM Management and BAM Trading may dispose, transfer, pledge, encumber, or assign assets Page 5 presently owned by BAM Management or BAM Trading, in whatever form such assets may exist
and wherever located, solely to make payments for expenses or to satisfy obligations incurred in
the ordinary course of business as set forth in Docket No. 62 (“BAM Ordinary Course Business
Expenses”) and for no other purpose. BAM Trading and BAM Management may not in any
circumstance make payments, incur any new obligations, or transfer any assets, to or for the benefit
of any of the Binance Entities or any individual or entity acting on behalf or for the benefit of any
such Binance Entity.
4.
IT IS FURTHER ORDERED that, during the pendency of this action, BAM
Trading and BAM Management shall provide, subject to a protective order entered in this case,
the SEC’s counsel of record with a copy of its monthly report of BAM Ordinary Course Business
Expenses (substantially in the form set forth in Exhibit A in the mediation) that include the total
amount spent, a breakdown of the amounts in each category and subcategory enumerated in
Exhibit A, and any amounts aggregating in excess of $150,000 to foreign payees. The SEC may
seek further information from BAM Management and BAM Trading concerning the monthly
BAM Ordinary Course Business Expenses information as set forth in Exhibit A.
5.
IT IS FURTHER ORDERED that within 14 days of entry of the Consent
Order, Stipulating Defendants will ensure that “Private and Administrative Keys,” as defined in
Section I (page 2) of this Consent Order, and, upon creation, New Private and Administrative
Keys, will be in the sole possession, custody, and control of BAM Trading officers and
employees who are located in the United States, or by non-affiliated third-party custodians in
the United States under the direction and control of BAM Management and BAM Trading
officers and employees located in the United States. The Private and Administrative Keys and
New Private and Administrative Keys, will not be provided to or in any way shared with the Page 6 Binance Entities. BAM Trading will keep current its list of hot and cold wallets and make that
list available to counsel of record for the SEC upon request.
6.
IT IS FURTHER ORDERED that BAM Trading may continue to transfer
Customer Assets to external wallets or accounts solely at the direction of the beneficial owners
of such Customer Assets or to support redemptions or transfers directed by such customers
subject to the prohibition above that BAM Trading and BAM Management, including their
officers and employees, may not in any circumstance transfer Customer Assets to or for the
benefit of any of the Binance Entities. Notwithstanding the foregoing and subject to BAM
Trading’s inclusion of the details of any such redemptions in or alongside its monthly report of
BAM Ordinary Course Business Expenses and subject to a protective order entered in this case,
BAM Trading may support redemptions of Customer Assets belonging personally to U.S.-based
employees of Binance Entities.
7.
IT IS FURTHER ORDERED that BAM Trading may transfer custody of
Customer Crypto Assets deposited, held, traded, staked, or accrued through BAM Trading’s
staking-as-a-service program (“Staking Assets”) to custodians BitGO or Aegis provided the
following criteria are met:
a. the control of Staking Assets in these wallets, including, but not limited to,
Private and Administrative Keys and New Private and Administrative Keys, are
maintained and directed solely by BAM Trading officers and employees located
in the United States or by BitGO and Aegis;
b. if BAM Trading holds the Private and Administrative Keys or New Private and
Administrative Keys for these wallets, custody and control of these keys is held
in the United States by BAM Trading personnel located in the United States; and Page 7 c. all transfers and withdrawals require the approval of both BAM Trading and, as
necessary, BitGO and Aegis.
d. The Binance Entities shall not have possession, custody, or control of these
Staking Assets, including, but not limited to, any authority, formally or
informally, directly or indirectly, to control, transfer, or withdraw, these Staking
Assets.
III.
IT IS FURTHER ORDERED that Stipulating Defendants, their directors, officers,
agents, servants, employees, attorneys, depositories, banks, and those persons in active concert
or participation with any one or more of them, and each of them, be and they hereby are
restrained and enjoined from, directly or indirectly, destroying, mutilating, concealing, altering,
disposing of, or otherwise rendering illegible in any manner, any of the books, records,
documents, correspondence, brochures, manuals, papers, ledgers, accounts, statements,
obligations, files and other property of or pertaining to Stipulating Defendants relevant to the
subject matter of this action, wherever located and in whatever form, electronic or otherwise,
until further Order of this Court or as required in Section II.1.
IV.
IT IS FURTHER ORDERED that, on or before 20 days from the date the Court
enters this Consent Order, the Stipulating Defendants, to the best of their knowledge and
ability, provide counsel for the SEC with a preliminary list of:
1. accounts and wallets holding Customer Fiat, Customer Crypto Assets, and funds
or assets of either BAM entity, and the value of the Customer Fiat, Customer
Crypto Assets, and funds or assets held; and Page 8 2. customers of the Binance.US trading platforms and related services, and the
balance of Customer Assets associated with each customer’s Binance.US account
and/or Binance.US wallet.
IT IS FURTHER ORDERED that, on or before 20 days from the date the Court
enters this Consent Order, Binance will provide counsel for the SEC with details about the
users on the Binance.com platform previously reflected in the aggregate U.S. KYC and
potential U.S. non-KYC trading datasets produced to the SEC on December 6, 2021 and
August 18, 2022 reflecting U.S. KYC users who engaged in transactions on Binance.com
beginning on June 1, 2019 and ending in September 2021 and potential U.S. non-KYC users
who engaged in transactions on Binance.com beginning on June 1, 2019 and ending on
January 19, 2022. To the extent such users remain on the Binance.com platform, Binance will
provide counsel for the SEC with details of their restricted account balances.
IT IS FURTHER ORDERED that, on or before 45 days from the date the Court issues
this Consent Order, each of the Stipulating Defendants shall serve upon the Commission a
verified written accounting, which the Stipulating Defendants must sign, including through an
officer for each entity authorized to sign on behalf of and bind the entity Defendants, under
penalty of perjury, providing the following information;
1.
Each account or wallet holding Customer Assets or assets of either BAM
Management or BAM Trading (“BAM Entity”), regardless of the account or wallet holder or
signatory, and/or maintained in any BAM Entity’s name, held by any BAM Entity or for any
BAM Entity’s direct or indirect beneficial interest, or over which any BAM Entity exercised
any direct or indirect control from December 1, 2022, through the date of the accounting,
including the name of the financial institution, exchange, or other entity or individual holding Page 9 such account or wallet, name and the account number, and the wallet address; and
2.
All assets, funds, crypto assets, securities, or other property, real or personal,
within each BAM Entity’s possession, custody, or control, that is valued greater than $1,000,
that was transferred to or for the benefit of any Defendant or any Binance Entity from December
1, 2022, to the date of the accounting, including a description of each transfer and what was
transferred, the value of the transfer, the name of the recipient, the date of the transfer, and the
reason for the transfer;
V.
IT IS FURTHER ORDERED THAT, commencing with the time and date of this
Order, in lieu of the time periods and notice provisions of Rules 26, 30, 33, 34, 36 and 45 of the
Federal Rules of Civil Procedure, discovery shall proceed as follows, subject to a protective
order entered in this case:
1.
For the next 90 days, the SEC may conduct expedited discovery of the Stipulating
Defendants (including their personnel) and of the BAM Entities’ third-party auditors and
custodians of assets concerning Customer Assets and their possession, custody, control, transfer
or movement, security, segregation, availability, and any encumbrances or limitations that
would make them unavailable for transfer or withdrawal by customers, including, but not limited
to type, identity, location, value, custody, control, restrictions, and whether there are sufficient
assets to satisfy customer liabilities or meet customer claims for Customer Assets held on their
behalf. Such expedited discovery shall not commence against Binance, Binance personnel, and
Zhao for 45 days. This limited expedited discovery pertaining to the Customer Assets shall not
be counted against any discovery limits imposed under the Federal Rules of Civil Procedure;
2.
Pursuant to Rule 30(a) of the Federal Rules of Civil Procedure and to the time Page 10 periods set forth in paragraph 1 above, the SEC may take depositions of the Stipulating
Defendants (including their personnel) and of the BAM Entities’ third-party auditors and
custodians of assets who are involved in or otherwise knowledgeable about asset clearing,
custody, and control, and software development and operational tasks associated with asset
clearing, custody, and control, regarding the Customer Assets, and their possession, custody,
control, transfer, movement, security, segregation, availability, and any encumbrances or
limitations that would make them unavailable for transfer or withdrawal by customers,
including, but not limited to type, identity, location, value, custody, control, restrictions, and
whether there are sufficient assets to satisfy customer liabilities or meet customer claims for
Customer Assets held on their behalf upon oral examination on 10 calendar days’ notice of any
such deposition. As to such personnel, the SEC may depose such witnesses after serving a
deposition notice by email, hand, or overnight courier upon such individuals, and without
serving a subpoena on such witness. If the Stipulating Parties agree to conduct any depositions
virtually, and the oath of the deponent may be administered remotely by the court reporter,
through audio-video means, and this oath shall have the same effect as if given in the physical
presence of the deponent. Subject to compliance with all laws, depositions of persons located
outside the United States shall presumptively be conducted remotely, provided such persons are
located in, or will travel to, a location where voluntary depositions and testimony under penalty
of perjury pursuant to the Federal Rules of Civil Procedure are permitted;
3.
Pursuant to Rule 33(a) of the Federal Rules of Civil Procedure and to the time
periods set forth in paragraph 1 above, the Stipulating Defendants shall answer any
interrogatories served by the SEC regarding Customer Assets and their possession, custody,
control, transfer, movement, security, segregation, availability, and any encumbrances or Page 11 limitations that would make them unavailable for transfer or withdrawal by customers,
including, but not limited to type, identity, location, value, custody, control, restrictions, and
whether there are sufficient assets to satisfy customer liabilities or meet customer claims for
Customer Assets held on their behalf, within 20 calendar days of service of such interrogatories;
4.
Pursuant to Rule 34(b) of the Federal Rules of Civil Procedure and to the time
periods set forth in paragraph 1 above, the Stipulating Defendants shall produce all documents
requested by the SEC regarding the Customer Assets and their possession, custody, control,
transfer, movement, security, segregation, availability, and any encumbrances or limitations that
would make them unavailable for transfer or withdrawal by customers, including, but not limited
to type, identity, location, value, custody, control, restrictions, and whether there are sufficient
assets to satisfy customer liabilities or meet customer claims for Customer Assets held on their
behalf within 10 calendar days of service of such request, with production of the documents
made to counsel of record for the SEC or such other person or place as counsel for the SEC may
direct in writing; and
5.
All written responses to the SEC’s requests for discovery under the Federal Rules
of Civil Procedure shall be delivered electronically, or such other place and person as counsel
for the SEC may direct in writing.
VI.
IT IS FURTHER ORDERED THAT for purposes of this action only Stipulating
Defendants have agreed to waive service of the Summons and Complaint pursuant to Federal
Rule of Civil Procedure 4(d) and to accept service through counsel of record of any further filing
or other process in this case. Page 12 VII.
IT IS FURTHER ORDERED THAT nothing in this Consent Order shall otherwise
alter the rights, obligations, or duties of the Stipulating Defendants or the SEC. Nothing in this
Consent Order shall be construed as affecting any party’s rights to assert any claims or defenses,
to constitute a waiver of any party’s right to a trial by jury, as precluding the parties from
objecting to the scope or nature of any discovery sought, or seeking to modify, on consent or by
order of the Court, any of the deadlines or orders set forth in this Order. Further, nothing in this
Order shall be construed as an explicit or implicit agreement or endorsement by the Commission
that the business of BAM Management and BAM Trading may continue or is otherwise lawful,
nor as a concession by the Stipulating Defendants that their actions were in any way improper
or unlawful.
VIII.
IT IS FURTHER ORDERED THAT this Court shall retain jurisdiction over the
Stipulating Defendants in order to modify, impose, implement, carry out, and enforce the terms
of this Consent Order.
IX.
The Stipulating Parties retain the right to seek additional relief, or relief from this
Consent Order, as available under the Federal Rules of Civil Procedure and applicable law,
including but not limited to Binance’s and Zhao’s ability to contest jurisdiction other than
jurisdiction to impose, implement, carry out, and enforce this Consent Order.
X.
IT IS FURTHER ORDERED THAT this Order binds the following who receive actual
notice of this Stipulation and Consent Order by personal service or otherwise: (a) each Stipulating Page 13 Defendant’s officers, agents, servants, employees, and attorneys; (b) other persons in active
concert or participation with Stipulating Defendants or with anyone described in (a).
SO AGREED this
day of June,
s/ William R. McLucas
s/Matthew Scarlato
Matthew Scarlato (D.C. Bar No. 484124)
Counsel for BAM Trading Services, Inc.
Jennifer L. Farer (D.C. Bar No. 1013915)
J. Emmett Murphy
William R. McLucas (pro hac vice)
David A. Nasse (D.C. Bar No. 1002567)
Matthew T. Martens (D.C. Bar #1019099)
Jorge G. Tenreiro
Matthew Beville (pro hac vice)
U.S. SECURITIES AND EXCHANGE COMMISSION WILMER CUTLER PICKERING HALE AND
100 F Street N.E.
DORR LLP
Washington, D.C. 2100 Pennsylvania Avenue NW
Washington, DC scarlatom@sec.gov
William.McLucas@wilmerhale.com
farerj@sec.gov
Matthew.Beville@wilmerhale.com
murphyJoh@sec.gov
Matthew.Martens@wilmerhale.com
Counsel for Plaintiff
Tiffany J. Smith (pro hac vice)
WILMER CUTLER PICKERING HALE AND
DORR LLP
7 World Trade Center
250 Greenwich Street
New York, NY Tiffany.Smith@wilmerhale.com
George S. Canellos (pro hac vice)
Matthew J. Laroche (pro hac vice)
MILBANK LLP
55 Hudson Yards
New York, NY GCanellos@milbank.com
MLaroche@milbank.com
Adam J. Fee (pro hac vice)
MILBANK LLP
2029 Century Park East, 33rd Floor
Los Angeles, CA AFee@milbank.com Page 14 s/ William R. McLucas
Counsel for BAM Management US Holdings, Inc.
William R. McLucas (pro hac vice)
Matthew T. Martens (D.C. Bar #1019099)
Matthew Beville (pro hac vice)
WILMER CUTLER PICKERING HALE AND
DORR LLP
2100 Pennsylvania Avenue NW
Washington, DC William.McLucas@wilmerhale.com
Matthew.Beville@wilmerhale.com
Matthew.Martens@wilmerhale.com
Tiffany J. Smith (pro hac vice)
WILMER CUTLER PICKERING HALE AND
DORR LLP
7 World Trade Center
250 Greenwich Street
New York, NY Tiffany.Smith@wilmerhale.com
George S. Canellos (pro hac vice)
Matthew J. Laroche (pro hac vice)
MILBANK LLP
55 Hudson Yards
New York, NY GCanellos@milbank.com
MLaroche@milbank.com
Adam J. Fee (pro hac vice)
MILBANK LLP
2029 Century Park East, 33rd Floor
Los Angeles, CA AFee@milbank.com Page 15 s/ Daniel W. Nelson
Counsel for Binance Holdings Limited Inc.
Daniel W. Nelson (D.C. Bar #433415)
Jason J. Mendro (D.C. Bar #482040)
Stephanie Brooker (pro hac vice)
M. Kendall Day (pro hac vice pending)
Richard W. Grime (pro hac vice pending)
GIBSON, DUNN & CRUTCHER LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-DNelson@gibsondunn.com
JMendro@gibsondunn.com
SBrooker@gibsondunn.com
KDay@gibsondunn.com
RGrime@gibsondunn.com
Michael Celio (pro hac vice)
GIBSON, DUNN & CRUTCHER LLP
1881 Page Mill Road
Palo Alto, CA 94304-MCelio@gibsondunn.com
Mary Beth Maloney (pro hac vice)
GIBSON, DUNN & CRUTCHER LLP
200 Park Avenue
New York, NY 10166-MMaloney@gibsondunn.com Page 16 s/ Abid R. Qureshi
Counsel for Changpeng Zhao
Abid R. Qureshi (D.C. Bar No. 459227)
William R. Baker, III (D.C. Bar No. 383944)
Michael E. Bern (D.C. Bar No. 994791)
LATHAM & WATKINS LLP
555 Eleventh Street, NW, Suite Washington, DC Tel: (202) 637-Fax: (202) 637-abid.qureshi@lw.com
william.baker@lw.com
michael.bern@lw.com
Douglas K. Yatter (pro hac vice)
Benjamin Naftalis (pro hac vice)
LATHAM & WATKINS LLP
1271 Avenue of the Americas
New York, NY Tel: (212) 906-Fax: (212) 751-douglas.yatter@lw.com
benjamin.naftalis@lw.com
Heather A. Waller (pro hac vice)
LATHAM & WATKINS LLP
330 North Wabash Avenue, Suite Chicago, IL Tel: (312) 876-Fax: (312) 993-heather.waller@lw.com
Melanie M. Blunschi (pro hac vice)
LATHAM & WATKINS LLP
505 Montgomery Street, Suite San Francisco, CA 94111-Tel: (415) 391-Fax: (415) 395-melanie.blunschi@lw.com Page 17 SO ORDERED this
day of June, 2023.
UNITED STATES DISTRICT JUDGE
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Case 1:23-cv-01599-ABJ Document 70-1 Filed 06/16/23 Page 1 of 17
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SECURITIES AND EXCHANGE
COMMISSION,
)
)
)
)
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
BINANCE HOLDINGS LIMITED,
BAM TRADING SERVICES, INC.,
BAM MANAGEMENT US HOLDINGS,
INC., and CHANGPENG ZHAO,
Defendants.
Civil Action No. 1:23-cv-01599-ABJ
[PROPOSED] STIPULATION AND CONSENT ORDER
Pursuant to Section 21(d) of the Securities Exchange Act of 1934 and Section 20(b) of
the Securities Act, and in order to preserve the status quo, Plaintiff Securities and Exchange
Commission (“Commission” or “SEC”) and Defendants Binance Holdings Limited
(“Binance”), BAM Trading Services, Inc. (“BAM Trading”), Changpeng Zhao (“Zhao”), and
BAM Management US Holdings, Inc. (“BAM Management,” together with Binance, BAM
Trading, Zhao, the “Stipulating Defendants,” and together with the SEC the “Stipulating
Parties”), hereby stipulate and consent, without a hearing, to the Court’s entry of this Stipulation
and Consent Order (“Consent Order”) as set forth below pending the Court’s final adjudication
of this matter or until further order of the Court.
The Stipulating Parties agree and the Court finds that the Court has jurisdiction over the
subject matter of this action, and that venue properly lies in this District.
Accordingly, based on the agreement of the Stipulating Parties and for good cause
shown, and subject to the protective order to be entered in this case, it is hereby
1
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Case 1:23-cv-01599-ABJ Document 70-1 Filed 06/16/23 Page 2 of 17
ORDERED:
I.
On or before the date the Court issues this Consent Order, the Stipulating Defendants
shall repatriate to the United States, transfer to BAM Trading, and confirm that BAM Trading
maintains possession, custody and control in the United States of all fiat currency and crypto
assets that are deposited, held, traded, or accrued by customers, including affiliated and nonaffiliated liquidity providers (hereinafter referred to as “Customers”) on the crypto trading
platform commonly known as “Binance.US” or otherwise held for the benefit of BAM Trading
or BAM Management Customers, including, but not limited to, those assets associated with
BAM Trading’s staking-as-a-service program, “Private and Administrative Keys,” (which are
defined as such keys and any portion or copy thereof, any devices, hardware, and/or software
managing such keys and any portion or copy thereof), the ledger device described in the SEC’s
memorandum of law (Docket No. 8-2), and the root access associated with the Amazon Web
Services account(s) for the Binance.US Platform), and any hardware crypto asset wallets
(hereinafter referred to as “Customer Fiat Assets” or “Customer Crypto Assets” and,
collectively, “Customer Assets”), except as otherwise specified in this Consent Order. The term
“Customer Assets” includes any New Private and Administrative Keys as defined in II.2 of this
Consent Order. For the avoidance of doubt, U.S.-based personnel for BAM Trading and BAM
Management will have complete control over Customer Fiat Assets and Customer Crypto
Assets, including assets associated with BAM Trading’s staking-as-a-service program, all
Private and Administrative Keys and New Private and Administrative Keys, that control any
wallets, staking operations, and/or any withdrawals, transfers, or movement of assets, except as
otherwise specified in this Consent Order. Nothing in this paragraph will prevent BAM Trading
2
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Case 1:23-cv-01599-ABJ Document 70-1 Filed 06/16/23 Page 3 of 17
from relying on non-affiliated third-party custodians located within the United States to provide
custody and related services.
II.
IT IS FURTHER ORDERED that on or before the date the Court issues this Consent
Order, Stipulating Defendants will, through their officers and employees or a non-affiliated third
party custodian within the United States, ensure, and each confirm to counsel of record for the
SEC, that BAM Trading and BAM Management obtain and maintain sole possession, custody,
and control of all Customer Assets and can transfer them solely for purposes set forth in this
Consent Order, and subject to the other provisions of this Consent Order, and all transfers and
withdrawals of Customer Assets will solely be under the direction and control of BAM Trading
and BAM Management, through officers and employees located in the United States, or a nonaffiliated third party custodian located in the United States;
1.
IT IS FURTHER ORDERED that BAM Trading and BAM Management will
not provide possession, custody, or control over Customer Assets to any individual or entity,
including Binance, Zhao, and, with the exception of BAM Trading and BAM Management, any
individual or entity with any affiliation, agreement, or other relationship with Binance, Zhao, or
any Zhao- owned or -controlled entity (these individuals and entities collectively, “Binance
Entities”). BAM Trading and BAM Management, including their officers and employees, will
remove and not designate any of the Binance Entities as an administrator, account holder or
signatory of, or otherwise having any authority to transfer or withdraw from, any account or
wallet holding Customer Assets, without first obtaining leave of the Court. Further, Stipulating
Defendants including their employees or agents, will delete or destroy, and will ensure the
Binance Entities delete or destroy, any existing copies of Private and Administrative Keys
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and/or effect the immediate dissolution of any existing formal or informal agreements (whether
written or verbal) for the control, exercise of control, or transfer of Private and Administrative
Keys or Customer Assets, that would facilitate or permit any transactions or actions contrary to
this Consent Order’s requirement that Customer Assets be held solely by BAM Trading and
BAM Management in the United States and may be transferred solely for the purposes set forth
in this Consent Order. This paragraph does not limit BAM Trading’s ability to provide
customers other than the Binance Entities with possession, custody, or control over their own
Customer Assets or rely on non-affiliated third-party custodians in the United States to provide
custody and related services for Customer Assets.
2.
IT IS FURTHER ORDERED that within 14 days of entry of the Consent
Order, BAM Trading and BAM Management will begin to establish new wallets, and
Stipulating Defendants will begin to transfer all Customer Crypto Assets to the new wallets with
new private and administrative keys. These “New Private and Administrative Keys” (which are
defined as such keys and any portion or copy thereof, any devices and/or software managing
such keys, and any portion or copy thereof for the new wallets) will be in the sole possession,
custody, and control of BAM Trading officers and employees who are located in the United
States. These New Private and Administrative Keys, will not be provided to or in any way
shared with the Binance Entities. BAM Trading shall confer with counsel of record for the SEC
regarding a reasonable timeline for completing this work and will provide them with the
addresses for all new wallets holding Customer Assets, both hot and cold, and will identify the
specific crypto asset(s) held within each wallet.
3.
IT IS FURTHER ORDERED that for the pendency of this litigation Defendants
BAM Management and BAM Trading may dispose, transfer, pledge, encumber, or assign assets
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presently owned by BAM Management or BAM Trading, in whatever form such assets may exist
and wherever located, solely to make payments for expenses or to satisfy obligations incurred in
the ordinary course of business as set forth in Docket No. 62 (“BAM Ordinary Course Business
Expenses”) and for no other purpose. BAM Trading and BAM Management may not in any
circumstance make payments, incur any new obligations, or transfer any assets, to or for the benefit
of any of the Binance Entities or any individual or entity acting on behalf or for the benefit of any
such Binance Entity.
4.
IT IS FURTHER ORDERED that, during the pendency of this action, BAM
Trading and BAM Management shall provide, subject to a protective order entered in this case,
the SEC’s counsel of record with a copy of its monthly report of BAM Ordinary Course Business
Expenses (substantially in the form set forth in Exhibit A in the mediation) that include the total
amount spent, a breakdown of the amounts in each category and subcategory enumerated in
Exhibit A, and any amounts aggregating in excess of $150,000 to foreign payees. The SEC may
seek further information from BAM Management and BAM Trading concerning the monthly
BAM Ordinary Course Business Expenses information as set forth in Exhibit A.
5.
IT IS FURTHER ORDERED that within 14 days of entry of the Consent
Order, Stipulating Defendants will ensure that “Private and Administrative Keys,” as defined in
Section I (page 2) of this Consent Order, and, upon creation, New Private and Administrative
Keys, will be in the sole possession, custody, and control of BAM Trading officers and
employees who are located in the United States, or by non-affiliated third-party custodians in
the United States under the direction and control of BAM Management and BAM Trading
officers and employees located in the United States. The Private and Administrative Keys and
New Private and Administrative Keys, will not be provided to or in any way shared with the
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Binance Entities. BAM Trading will keep current its list of hot and cold wallets and make that
list available to counsel of record for the SEC upon request.
6.
IT IS FURTHER ORDERED that BAM Trading may continue to transfer
Customer Assets to external wallets or accounts solely at the direction of the beneficial owners
of such Customer Assets or to support redemptions or transfers directed by such customers
subject to the prohibition above that BAM Trading and BAM Management, including their
officers and employees, may not in any circumstance transfer Customer Assets to or for the
benefit of any of the Binance Entities. Notwithstanding the foregoing and subject to BAM
Trading’s inclusion of the details of any such redemptions in or alongside its monthly report of
BAM Ordinary Course Business Expenses and subject to a protective order entered in this case,
BAM Trading may support redemptions of Customer Assets belonging personally to U.S.-based
employees of Binance Entities.
7.
IT IS FURTHER ORDERED that BAM Trading may transfer custody of
Customer Crypto Assets deposited, held, traded, staked, or accrued through BAM Trading’s
staking-as-a-service program (“Staking Assets”) to custodians BitGO or Aegis provided the
following criteria are met:
a. the control of Staking Assets in these wallets, including, but not limited to,
Private and Administrative Keys and New Private and Administrative Keys, are
maintained and directed solely by BAM Trading officers and employees located
in the United States or by BitGO and Aegis;
b. if BAM Trading holds the Private and Administrative Keys or New Private and
Administrative Keys for these wallets, custody and control of these keys is held
in the United States by BAM Trading personnel located in the United States; and
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c. all transfers and withdrawals require the approval of both BAM Trading and, as
necessary, BitGO and Aegis.
d. The Binance Entities shall not have possession, custody, or control of these
Staking Assets, including, but not limited to, any authority, formally or
informally, directly or indirectly, to control, transfer, or withdraw, these Staking
Assets.
III.
IT IS FURTHER ORDERED that Stipulating Defendants, their directors, officers,
agents, servants, employees, attorneys, depositories, banks, and those persons in active concert
or participation with any one or more of them, and each of them, be and they hereby are
restrained and enjoined from, directly or indirectly, destroying, mutilating, concealing, altering,
disposing of, or otherwise rendering illegible in any manner, any of the books, records,
documents, correspondence, brochures, manuals, papers, ledgers, accounts, statements,
obligations, files and other property of or pertaining to Stipulating Defendants relevant to the
subject matter of this action, wherever located and in whatever form, electronic or otherwise,
until further Order of this Court or as required in Section II.1.
IV.
IT IS FURTHER ORDERED that, on or before 20 days from the date the Court
enters this Consent Order, the Stipulating Defendants, to the best of their knowledge and
ability, provide counsel for the SEC with a preliminary list of:
1. accounts and wallets holding Customer Fiat, Customer Crypto Assets, and funds
or assets of either BAM entity, and the value of the Customer Fiat, Customer
Crypto Assets, and funds or assets held; and
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2. customers of the Binance.US trading platforms and related services, and the
balance of Customer Assets associated with each customer’s Binance.US account
and/or Binance.US wallet.
IT IS FURTHER ORDERED that, on or before 20 days from the date the Court
enters this Consent Order, Binance will provide counsel for the SEC with details about the
users on the Binance.com platform previously reflected in the aggregate U.S. KYC and
potential U.S. non-KYC trading datasets produced to the SEC on December 6, 2021 and
August 18, 2022 reflecting U.S. KYC users who engaged in transactions on Binance.com
beginning on June 1, 2019 and ending in September 2021 and potential U.S. non-KYC users
who engaged in transactions on Binance.com beginning on June 1, 2019 and ending on
January 19, 2022. To the extent such users remain on the Binance.com platform, Binance will
provide counsel for the SEC with details of their restricted account balances.
IT IS FURTHER ORDERED that, on or before 45 days from the date the Court issues
this Consent Order, each of the Stipulating Defendants shall serve upon the Commission a
verified written accounting, which the Stipulating Defendants must sign, including through an
officer for each entity authorized to sign on behalf of and bind the entity Defendants, under
penalty of perjury, providing the following information;
1.
Each account or wallet holding Customer Assets or assets of either BAM
Management or BAM Trading (“BAM Entity”), regardless of the account or wallet holder or
signatory, and/or maintained in any BAM Entity’s name, held by any BAM Entity or for any
BAM Entity’s direct or indirect beneficial interest, or over which any BAM Entity exercised
any direct or indirect control from December 1, 2022, through the date of the accounting,
including the name of the financial institution, exchange, or other entity or individual holding
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such account or wallet, name and the account number, and the wallet address; and
2.
All assets, funds, crypto assets, securities, or other property, real or personal,
within each BAM Entity’s possession, custody, or control, that is valued greater than $1,000,
that was transferred to or for the benefit of any Defendant or any Binance Entity from December
1, 2022, to the date of the accounting, including a description of each transfer and what was
transferred, the value of the transfer, the name of the recipient, the date of the transfer, and the
reason for the transfer;
V.
IT IS FURTHER ORDERED THAT, commencing with the time and date of this
Order, in lieu of the time periods and notice provisions of Rules 26, 30, 33, 34, 36 and 45 of the
Federal Rules of Civil Procedure, discovery shall proceed as follows, subject to a protective
order entered in this case:
1.
For the next 90 days, the SEC may conduct expedited discovery of the Stipulating
Defendants (including their personnel) and of the BAM Entities’ third-party auditors and
custodians of assets concerning Customer Assets and their possession, custody, control, transfer
or movement, security, segregation, availability, and any encumbrances or limitations that
would make them unavailable for transfer or withdrawal by customers, including, but not limited
to type, identity, location, value, custody, control, restrictions, and whether there are sufficient
assets to satisfy customer liabilities or meet customer claims for Customer Assets held on their
behalf. Such expedited discovery shall not commence against Binance, Binance personnel, and
Zhao for 45 days. This limited expedited discovery pertaining to the Customer Assets shall not
be counted against any discovery limits imposed under the Federal Rules of Civil Procedure;
2.
Pursuant to Rule 30(a) of the Federal Rules of Civil Procedure and to the time
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periods set forth in paragraph 1 above, the SEC may take depositions of the Stipulating
Defendants (including their personnel) and of the BAM Entities’ third-party auditors and
custodians of assets who are involved in or otherwise knowledgeable about asset clearing,
custody, and control, and software development and operational tasks associated with asset
clearing, custody, and control, regarding the Customer Assets, and their possession, custody,
control, transfer, movement, security, segregation, availability, and any encumbrances or
limitations that would make them unavailable for transfer or withdrawal by customers,
including, but not limited to type, identity, location, value, custody, control, restrictions, and
whether there are sufficient assets to satisfy customer liabilities or meet customer claims for
Customer Assets held on their behalf upon oral examination on 10 calendar days’ notice of any
such deposition. As to such personnel, the SEC may depose such witnesses after serving a
deposition notice by email, hand, or overnight courier upon such individuals, and without
serving a subpoena on such witness. If the Stipulating Parties agree to conduct any depositions
virtually, and the oath of the deponent may be administered remotely by the court reporter,
through audio-video means, and this oath shall have the same effect as if given in the physical
presence of the deponent. Subject to compliance with all laws, depositions of persons located
outside the United States shall presumptively be conducted remotely, provided such persons are
located in, or will travel to, a location where voluntary depositions and testimony under penalty
of perjury pursuant to the Federal Rules of Civil Procedure are permitted;
3.
Pursuant to Rule 33(a) of the Federal Rules of Civil Procedure and to the time
periods set forth in paragraph 1 above, the Stipulating Defendants shall answer any
interrogatories served by the SEC regarding Customer Assets and their possession, custody,
control, transfer, movement, security, segregation, availability, and any encumbrances or
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limitations that would make them unavailable for transfer or withdrawal by customers,
including, but not limited to type, identity, location, value, custody, control, restrictions, and
whether there are sufficient assets to satisfy customer liabilities or meet customer claims for
Customer Assets held on their behalf, within 20 calendar days of service of such interrogatories;
4.
Pursuant to Rule 34(b) of the Federal Rules of Civil Procedure and to the time
periods set forth in paragraph 1 above, the Stipulating Defendants shall produce all documents
requested by the SEC regarding the Customer Assets and their possession, custody, control,
transfer, movement, security, segregation, availability, and any encumbrances or limitations that
would make them unavailable for transfer or withdrawal by customers, including, but not limited
to type, identity, location, value, custody, control, restrictions, and whether there are sufficient
assets to satisfy customer liabilities or meet customer claims for Customer Assets held on their
behalf within 10 calendar days of service of such request, with production of the documents
made to counsel of record for the SEC or such other person or place as counsel for the SEC may
direct in writing; and
5.
All written responses to the SEC’s requests for discovery under the Federal Rules
of Civil Procedure shall be delivered electronically, or such other place and person as counsel
for the SEC may direct in writing.
VI.
IT IS FURTHER ORDERED THAT for purposes of this action only Stipulating
Defendants have agreed to waive service of the Summons and Complaint pursuant to Federal
Rule of Civil Procedure 4(d) and to accept service through counsel of record of any further filing
or other process in this case.
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VII.
IT IS FURTHER ORDERED THAT nothing in this Consent Order shall otherwise
alter the rights, obligations, or duties of the Stipulating Defendants or the SEC. Nothing in this
Consent Order shall be construed as affecting any party’s rights to assert any claims or defenses,
to constitute a waiver of any party’s right to a trial by jury, as precluding the parties from
objecting to the scope or nature of any discovery sought, or seeking to modify, on consent or by
order of the Court, any of the deadlines or orders set forth in this Order. Further, nothing in this
Order shall be construed as an explicit or implicit agreement or endorsement by the Commission
that the business of BAM Management and BAM Trading may continue or is otherwise lawful,
nor as a concession by the Stipulating Defendants that their actions were in any way improper
or unlawful.
VIII.
IT IS FURTHER ORDERED THAT this Court shall retain jurisdiction over the
Stipulating Defendants in order to modify, impose, implement, carry out, and enforce the terms
of this Consent Order.
IX.
The Stipulating Parties retain the right to seek additional relief, or relief from this
Consent Order, as available under the Federal Rules of Civil Procedure and applicable law,
including but not limited to Binance’s and Zhao’s ability to contest jurisdiction other than
jurisdiction to impose, implement, carry out, and enforce this Consent Order.
X.
IT IS FURTHER ORDERED THAT this Order binds the following who receive actual
notice of this Stipulation and Consent Order by personal service or otherwise: (a) each Stipulating
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Defendant’s officers, agents, servants, employees, and attorneys; (b) other persons in active
concert or participation with Stipulating Defendants or with anyone described in (a).
SO AGREED this
day of June, 2023
s/ William R. McLucas
s/Matthew Scarlato
Matthew Scarlato (D.C. Bar No. 484124)
Counsel for BAM Trading Services, Inc.
Jennifer L. Farer (D.C. Bar No. 1013915)
J. Emmett Murphy
William R. McLucas (pro hac vice)
David A. Nasse (D.C. Bar No. 1002567)
Matthew T. Martens (D.C. Bar #1019099)
Jorge G. Tenreiro
Matthew Beville (pro hac vice)
U.S. SECURITIES AND EXCHANGE COMMISSION WILMER CUTLER PICKERING HALE AND
100 F Street N.E.
DORR LLP
Washington, D.C. 20549
2100 Pennsylvania Avenue NW
Washington, DC 20037
scarlatom@sec.gov
William.McLucas@wilmerhale.com
farerj@sec.gov
Matthew.Beville@wilmerhale.com
murphyJoh@sec.gov
Matthew.Martens@wilmerhale.com
Counsel for Plaintiff
Tiffany J. Smith (pro hac vice)
WILMER CUTLER PICKERING HALE AND
DORR LLP
7 World Trade Center
250 Greenwich Street
New York, NY 10007
Tiffany.Smith@wilmerhale.com
George S. Canellos (pro hac vice)
Matthew J. Laroche (pro hac vice)
MILBANK LLP
55 Hudson Yards
New York, NY 10001
GCanellos@milbank.com
MLaroche@milbank.com
Adam J. Fee (pro hac vice)
MILBANK LLP
2029 Century Park East, 33rd Floor
Los Angeles, CA 90067
AFee@milbank.com
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s/ William R. McLucas
Counsel for BAM Management US Holdings, Inc.
William R. McLucas (pro hac vice)
Matthew T. Martens (D.C. Bar #1019099)
Matthew Beville (pro hac vice)
WILMER CUTLER PICKERING HALE AND
DORR LLP
2100 Pennsylvania Avenue NW
Washington, DC 20037
William.McLucas@wilmerhale.com
Matthew.Beville@wilmerhale.com
Matthew.Martens@wilmerhale.com
Tiffany J. Smith (pro hac vice)
WILMER CUTLER PICKERING HALE AND
DORR LLP
7 World Trade Center
250 Greenwich Street
New York, NY 10007
Tiffany.Smith@wilmerhale.com
George S. Canellos (pro hac vice)
Matthew J. Laroche (pro hac vice)
MILBANK LLP
55 Hudson Yards
New York, NY 10001
GCanellos@milbank.com
MLaroche@milbank.com
Adam J. Fee (pro hac vice)
MILBANK LLP
2029 Century Park East, 33rd Floor
Los Angeles, CA 90067
AFee@milbank.com
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s/ Daniel W. Nelson
Counsel for Binance Holdings Limited Inc.
Daniel W. Nelson (D.C. Bar #433415)
Jason J. Mendro (D.C. Bar #482040)
Stephanie Brooker (pro hac vice)
M. Kendall Day (pro hac vice pending)
Richard W. Grime (pro hac vice pending)
GIBSON, DUNN & CRUTCHER LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036-5306
DNelson@gibsondunn.com
JMendro@gibsondunn.com
SBrooker@gibsondunn.com
KDay@gibsondunn.com
RGrime@gibsondunn.com
Michael Celio (pro hac vice)
GIBSON, DUNN & CRUTCHER LLP
1881 Page Mill Road
Palo Alto, CA 94304-1211
MCelio@gibsondunn.com
Mary Beth Maloney (pro hac vice)
GIBSON, DUNN & CRUTCHER LLP
200 Park Avenue
New York, NY 10166-0193
MMaloney@gibsondunn.com
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s/ Abid R. Qureshi
Counsel for Changpeng Zhao
Abid R. Qureshi (D.C. Bar No. 459227)
William R. Baker, III (D.C. Bar No. 383944)
Michael E. Bern (D.C. Bar No. 994791)
LATHAM & WATKINS LLP
555 Eleventh Street, NW, Suite 1000
Washington, DC 20004
Tel: (202) 637-2200
Fax: (202) 637-2201
abid.qureshi@lw.com
william.baker@lw.com
michael.bern@lw.com
Douglas K. Yatter (pro hac vice)
Benjamin Naftalis (pro hac vice)
LATHAM & WATKINS LLP
1271 Avenue of the Americas
New York, NY 10020
Tel: (212) 906-1200
Fax: (212) 751-4864
douglas.yatter@lw.com
benjamin.naftalis@lw.com
Heather A. Waller (pro hac vice)
LATHAM & WATKINS LLP
330 North Wabash Avenue, Suite 2800
Chicago, IL 60611
Tel: (312) 876-7700
Fax: (312) 993-9767
heather.waller@lw.com
Melanie M. Blunschi (pro hac vice)
LATHAM & WATKINS LLP
505 Montgomery Street, Suite 2000
San Francisco, CA 94111-6538
Tel: (415) 391-0600
Fax: (415) 395-8095
melanie.blunschi@lw.com
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SO ORDERED this
day of June, 2023.
UNITED STATES DISTRICT JUDGE
17
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