Page 1Page 2 WILMERHALE
Matthew Beville
+1 202 663 6255 (t)
+1 202 663 6363 (f)
matthew.beville@wilmerhale.com
July 31, VIA EMAIL
Jennifer L. Farer
Matthew F. Scarlato
Senior Trial Counsel
Division of Enforcement
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC Re:
Binance Holdings Limited, et al. v. SEC, No. 23 Civ. 1599 (ABJ)
Expedited Discovery Issues
Dear Ms. Farer and Mr. Scarlato:
We write on behalf of BAM Trading Services Inc. and BAM Management US Holdings
Inc. (collectively, “BAM”) in response to various requests made during our July 24, 2023 meet
and confer and to your July 28, 2023 email.
As an initial matter, you claim that BAM has produced less than 60 documents and
provided limited information in response to Interrogatories, but this is a gross mischaracterization
of the record. By the time the Complaint was filed in this matter, the SEC already had an immense
amount of documents and information concerning BAM’s asset custody practices. BAM made
significant efforts over more than three years to cooperate with the SEC’s investigation in this
matter. During that time, BAM produced more than 700,000 individual communications,
including approximately 11,391 emails, 8,196 email attachments, and 652,817 other messages.
BAM also prepared bespoke data (including years’ worth of revenue data) and dozens of pages of
narrative and interrogatory responses to the SEC’s requests and follow-up questions, detailing
virtually every aspect of its business. Moreover, in the months before the Complaint was filed,
the SEC began to focus on the custody of BAM’s assets, and BAM continued to cooperate in good
faith, working around the clock to address the SEC’s questions. In addition to numerous telephone
conversations, BAM provided the SEC with detailed written responses to the SEC’s questions
about BAM’s customer assets in letters dated May 25, 2023, May 26, 2023, June 1, 2023, and June
2, 2023.
Despite having access to this documentation and information, the SEC chose to serve
incredibly overbroad and unduly burdensome discovery requests that seek, on their face, every
document and communication in BAM’s possession related to Customer Assets. The SEC’s
Wilmer Cutler Pickering Hale and Dorr
Beijing
Berlin
Boston
Brussels
Denver
Frankfurt
11r,
2100 Pennsylvania Avenue NW, Washington DC
London
Los Angeles
New York
Palo Alto
San Francisco
WashingtonPage 3 WILMERHALE
Jennifer L. Farer and Matthew F. Scarlato
July 31, Page
approach ignores and has gone far beyond the scope of expedited discovery authorized by the
Consent Order. The Consent Order states that the SEC may conduct “limited expedited discovery”
concerning, in substance, the possession, custody, transfer, and control of Customer Assets,
including whether BAM can meet customer claims and liabilities. This provision does not permit
the SEC to conduct freewheeling discovery of historical asset custody practices that have no
bearing on or relevance to the security and custody of Customer Assets today.
Regardless, BAM has worked in good faith to respond to your requests, diligently collected
documents and information, made several productions, made witnesses available for depositions,
and provided a substantial amount of additional information through letters, interrogatory
responses, and declarations. This has included providing a detailed discovery plan with priority
and secondary priority productions, which BAM has executed on. The SEC has chosen not to take
advantage of the availability of witnesses who are best positioned to answer your questions.
Your correspondence suggests that our approach is inconsistent with the Consent Order,
but you do not explain why that is so. When you have raised specific issues during our meet and
confers, we addressed them in follow-up correspondence or are doing so below. However, when
we requested that the SEC consider limiting its requests, the SEC has declined to do so and
continued to take the position that BAM is required to produce “All Documents and
Communications Concerning” various topics. The SEC’s approach is unreasonable, appears to be
a fishing expedition, and leaves BAM guessing as to what additional documents and information
would satisfy the SEC’s stated concerns.
Nevertheless, BAM remains willing to work with you in good faith to address specific
concerns. BAM intends to complete its production of materials in response to the SEC’s discovery
requests by the end of this week. BAM responds to the SEC’s open requests as follows:
Policies and Procedures Related to BAM Customer Assets (RFP Nos. 1, 4, 5;
Interrogatory No. 6): You made several requests related to the policies and procedures concerning
BAM Customer Assets, including that BAM (i) identify the policies currently in place; (ii)
summarize how policies are conveyed to employees; (iii) identify the commentor on Binance.US
Digital Asset & Custody Security Standard; (iv) identify who received the Device Management
and Handling Procedures and whether it is still in place; and (v) explain when revised policies will
be finalized and produced. While these requests are more appropriate lines of inquiry for
depositions, we have conferred with BAM personnel and provide the following responses:
First, the policies produced to date remain in place, including the Binance.US Digital Asset
& Custody Operations Policy (BAM_SEC_LIT_00000001); Device Management and Handling
Procedures (BAM_SEC_LIT_00000021); Binance.US Business Continuity and Disaster
Recovery
Plan
(BAM_SEC_LIT_00000043);
Binance.US
Risk
Methodology
(BAM_SEC_LIT_00000094);
and
Binance.US
Vendor
Due
Diligence
PolicyPage 4 WILMERHALE
Jennifer L. Farer and Matthew F. Scarlato
July 31, Page
(BAM_SEC_LIT_00000130). While the Binance.US Digital Asset & Custody Security Standard
policy is in draft form, BAM has summarized the procedures concerning the security of Customer
Assets in other documents, including in the Declaration of Erik Kellogg and BAM’s responses to
the SEC’s First Set of Interrogatories. BAM also has policies focused on IT and cybersecurity.
While we do not understand the SEC to be focused on those policies, out of an abundance of
caution, we are producing them with this letter bearing Bates Nos. BAM_SEC_LIT_through BAM_SEC_LIT_00000903.
Second, BAM’s Security team, including Mr. Kellogg, BAM’s Chief Information Security
Officer, are responsible for ensuring that policies concerning Customer Assets are conveyed to the
appropriate BAM personnel. This occurs in a variety of ways, including through briefings,
communications, and making policies available to the necessary personnel. For security purposes,
BAM’s policies concerning Customer Assets are conveyed to employees on a need-to-know basis.
Third, the commentor on the Binance.US Digital Asset & Custody Security Standard,
previously produced bearing Bates Nos. BAM_SEC_LIT_00000104, is Mr. Kellogg, and we are
producing the native draft document with this letter. As to the “Users” and “Requestors” identified
in the draft, those functions are filled by members of the Clearing Team as described in our July
7, 2023 correspondence.
Fourth, BAM’s Security team provided the Device Management and Handling Procedures
to the holders of the New Private and Administrative Keys. BAM’s Security team also briefed
those individuals on the procedures and best practices for security regarding the New Private and
Administrative Keys. As noted, the Device Management and Handling Procedures remain in
place.
Finally, as you know, BAM is in the process of revising its policies, which involves
drafting and/or review by BAM’s Security team and appropriate BAM executives. There is no set
timeline in place for approval of the revised policies.
●
Custody of Customer Assets (RFP Nos. 6-8, 20): You requested additional
materials relating to BAM’s banking arrangements, including account opening documents and
bank statements. BAM is conducting a search for responsive documents during the relevant time
period (November 2022 to present) involving its banking partners—including (i) Prime
Trust/Cross River Bank; (ii) Axos; (iii) BitGo/Customers Bank; (iv) Orum/Silicon Valley Bank;
(v) Nuvei/Fresno First Bank; (vi) Wyre; and (vii) Aegis—and will complete its production this
week.
●
Old and New Private and Administrative Keys (Interrogatory No. 2): You
requested the dates when individuals held the Private and Administrative Keys and New Private
and Administrative Keys. BAM will respond to this request this week.Page 5 WILMERHALE
Jennifer L. Farer and Matthew F. Scarlato
July 31, Page
●
Prior BHL/Zhao Employment (Interrogatory No. 4): You requested that BAM
identify the dates when BAM employees were employed by BHL and/or Zhao. BAM continues
to believe that this information is not within the relevant scope of the Consent Order.
●
BAM’s Ownership Interests (Interrogatory No. 5): BAM is producing a document
bearing Bates Nos. BAM_SEC_LIT_00000904 through BAM_SEC_LIT_00000908 identifying
the Series Seed Investors who have an ownership interest in BAM Management US Holdings Inc.
●
Wallet Custody Agreement (Interrogatory No. 9): As we have explained, the
Wallet Custody Agreement was never fully operationalized. To the extent that there are services
listed in the Wallet Custody Agreement that were provided under the Software Licensing
Agreement, we believe that relevant individuals have been fully identified in responses to other
requests.
●
Audit-Related Requests (RFP Nos. 26, 27; Interrogatory Nos. 10-11): We do not
intend to produce documents in response to your requests for “All Documents and
Communications” related to audit-related materials absent the SEC limiting those requests, which
you have declined to do. We remain willing to discuss audit-related issues with you but are unable
to move those requests forward without further dialogue.
●
Custody of Assets Outside the United States (Interrogatory No. 12): Pursuant to
the Consent Order, BAM has confirmed that it maintains possession, custody, and control in the
United States of all Customer Assets. BAM does not believe that the SEC’s request for
information concerning historical asset custody practices and the reason for those practices is
within the relevant scope of or proportional to the needs of the Consent Order. Absent further
dialogue with the SEC on this Interrogatory, BAM will not produce documents or provide
information in response to it.
●
Sigma Chain and Merit Peak (Interrogatory No. 14): You asked for more
information concerning the roles of Sigma Chain and Merit Peak, including their role with respect
to security and control over Customer Assets. As we explained in BAM’s responses to the SEC’s
Interrogatories, Merit Peak no longer operates on BAM’s platform and, thus, we do not believe
discovery requests directed toward Merit Peak’s historical role on BAM’s platform (which was to
act as a market maker) are within the relevant scope of or proportional to the needs of the Consent
Order. Moreover, Merit Peak did not have a role with respect to the possession, custody, or control
of Customer Assets.
Sigma Chain is a public limited company formed in Switzerland in January 2019.
Although BAM and Sigma Chain share a common beneficial owner, they are entirely independent,
with separate management, personnel, offices, and infrastructure. Sigma Chain has historically
played several roles on BAM’s platform.Page 6 WILMERHALE
Jennifer L. Farer and Matthew F. Scarlato
July 31, Page
First, a Sigma Chain trading unit has acted as a market maker on BAM’s platform. We
understand that its strategy was entirely automated and intended to passively post two-sided quotes
in the instruments in which it traded. For several months between in 2022, we understand that
Sigma Chain also implemented an independent arbitrage strategy on the platform, which traded
heavily in stablecoins and other price-linked tokens.
Second, in addition to its trading platform, BAM offers customers access to a “One Click
Buy-Sell” (“OCBS”) window. This window allows retail participants to request a price, which is
valid for 30 seconds, to purchase or sell listed assets, without navigating through the active order
book. We understand that a different, independent Sigma Chain algorithm has acted as the
counterparty for this feature. If a customer accepted the price offered by Sigma Chain, the OCBS
algorithm executed the trade, and then exited the position via BAM’s order book.
Third, BAM offers institutional customers access to an over-the-counter (“OTC”) window
to execute large positions. A fourth, independent Sigma Chain algorithm has acted as the
counterparty for this feature. Like the OCBS window, the OTC algorithm provides quotes to
interested customers to immediately buy or sell “block” size orders in supported assets. If the
customer accepts the price, the OTC algorithm exits the position via the BAM Trading order book.
Depending on the size of the trade and the liquidity in the market, this hedging activity could be
conducted in multiple orders over time.
Related to these on-platform roles, Sigma Chain has also served as a counterparty for onchain “network swaps,” which involve exchanging an asset on one blockchain network—generally
a stablecoin—for the same quantity of the same asset on another blockchain network. These swaps
are necessary to manage inventory to facilitate customer withdrawals across networks for tokens
traded on multiple blockchains. Sigma Chain does not charge BAM for this service.
We are not aware of Sigma Chain serving in any other role on BAM’s platform during the
relevant time period. Moreover, as we previously explained, Sigma Chain has not and does not
have a role in the possession, custody, or control of Customer Assets.
●
Digital Asset Policies and Procedures (Interrogatory No. 22): You requested that
BAM provide additional information concerning the creation of the New Private and
Administrative Keys and security protocols related to them. As of the date of this letter, BAM has
created new cold wallets with New Private and Administrative Keys. The New Private and
Administrative Keys were created in consultation with Ceffu, and BAM submits that inquiries
concerning how Ceffu creates wallets should be directed to Ceffu. As noted earlier, BAM’s
security protocols concerning the New Private and Administrative Keys are summarized in the
Device Management and Handling Procedures and overseen by BAM’s Security team and CISO.Page 7 WILMERHALE
Jennifer L. Farer and Matthew F. Scarlato
July 31, Page
●
Format of Document Productions: BAM is reviewing its prior productions to
ensure that their format complies with applicable law. To the extent that BAM determines that the
reproduction of materials is necessary, it will do so during the week of August 7, 2023.
●
BAM’s Objections to Other Requests: You requested that BAM identify any
requests for which it does not intend to produce documents. As noted above, BAM does not intend
to produce documents or information in response to requests for audit-related materials or
information concerning historical asset custody practices. BAM has otherwise substantively
responded to all the requests made during our meet and confers and is willing to consider
additional, tailored requests. However, BAM maintains its objections to searching for or
producing materials in response to requests for “All Documents and Communications Concerning”
various topics and similarly worded requests.
*
*
*
Please let us know if you have any questions. We otherwise request that you schedule
depositions with Mr. Kellogg and Ms. Sisenwein, which we believe would help address your
concerns.
Very truly yours,
/s/ Matthew Beville
Matthew Beville
EnclosurePage 8 Exhibit A
Bates Range
Request No.
Interrogatory No.
BAM_SEC_LIT_(native draft document)
1, 4,
BAM_SEC_LIT_00000366BAM_SEC_LIT_
1, 4,
BAM_SEC_LIT_00000904BAM_SEC_LIT_
N/A
5
PDF Page 1
PlainSite Cover Page
PDF Page 2
Case 1:23-cv-01599-ABJ Document 95-9 Filed 08/14/23 Page 1 of 8
PDF Page 3
Case 1:23-cv-01599-ABJ Document 95-9 Filed 08/14/23 Page 2 of 8
WILMERHALE
Matthew Beville
+1 202 663 6255 (t)
+1 202 663 6363 (f)
matthew.beville@wilmerhale.com
July 31, 2023
VIA EMAIL
Jennifer L. Farer
Matthew F. Scarlato
Senior Trial Counsel
Division of Enforcement
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549
Re:
Binance Holdings Limited, et al. v. SEC, No. 23 Civ. 1599 (ABJ)
Expedited Discovery Issues
Dear Ms. Farer and Mr. Scarlato:
We write on behalf of BAM Trading Services Inc. and BAM Management US Holdings
Inc. (collectively, “BAM”) in response to various requests made during our July 24, 2023 meet
and confer and to your July 28, 2023 email.
As an initial matter, you claim that BAM has produced less than 60 documents and
provided limited information in response to Interrogatories, but this is a gross mischaracterization
of the record. By the time the Complaint was filed in this matter, the SEC already had an immense
amount of documents and information concerning BAM’s asset custody practices. BAM made
significant efforts over more than three years to cooperate with the SEC’s investigation in this
matter. During that time, BAM produced more than 700,000 individual communications,
including approximately 11,391 emails, 8,196 email attachments, and 652,817 other messages.
BAM also prepared bespoke data (including years’ worth of revenue data) and dozens of pages of
narrative and interrogatory responses to the SEC’s requests and follow-up questions, detailing
virtually every aspect of its business. Moreover, in the months before the Complaint was filed,
the SEC began to focus on the custody of BAM’s assets, and BAM continued to cooperate in good
faith, working around the clock to address the SEC’s questions. In addition to numerous telephone
conversations, BAM provided the SEC with detailed written responses to the SEC’s questions
about BAM’s customer assets in letters dated May 25, 2023, May 26, 2023, June 1, 2023, and June
2, 2023.
Despite having access to this documentation and information, the SEC chose to serve
incredibly overbroad and unduly burdensome discovery requests that seek, on their face, every
document and communication in BAM’s possession related to Customer Assets. The SEC’s
Wilmer Cutler Pickering Hale and Dorr
Beijing
Berlin
Boston
Brussels
Denver
Frankfurt
11r,
2100 Pennsylvania Avenue NW, Washington DC 20037
London
Los Angeles
New York
Palo Alto
San Francisco
Washington
PDF Page 4
Case 1:23-cv-01599-ABJ Document 95-9 Filed 08/14/23 Page 3 of 8
WILMERHALE
Jennifer L. Farer and Matthew F. Scarlato
July 31, 2023
Page 2
approach ignores and has gone far beyond the scope of expedited discovery authorized by the
Consent Order. The Consent Order states that the SEC may conduct “limited expedited discovery”
concerning, in substance, the possession, custody, transfer, and control of Customer Assets,
including whether BAM can meet customer claims and liabilities. This provision does not permit
the SEC to conduct freewheeling discovery of historical asset custody practices that have no
bearing on or relevance to the security and custody of Customer Assets today.
Regardless, BAM has worked in good faith to respond to your requests, diligently collected
documents and information, made several productions, made witnesses available for depositions,
and provided a substantial amount of additional information through letters, interrogatory
responses, and declarations. This has included providing a detailed discovery plan with priority
and secondary priority productions, which BAM has executed on. The SEC has chosen not to take
advantage of the availability of witnesses who are best positioned to answer your questions.
Your correspondence suggests that our approach is inconsistent with the Consent Order,
but you do not explain why that is so. When you have raised specific issues during our meet and
confers, we addressed them in follow-up correspondence or are doing so below. However, when
we requested that the SEC consider limiting its requests, the SEC has declined to do so and
continued to take the position that BAM is required to produce “All Documents and
Communications Concerning” various topics. The SEC’s approach is unreasonable, appears to be
a fishing expedition, and leaves BAM guessing as to what additional documents and information
would satisfy the SEC’s stated concerns.
Nevertheless, BAM remains willing to work with you in good faith to address specific
concerns. BAM intends to complete its production of materials in response to the SEC’s discovery
requests by the end of this week. BAM responds to the SEC’s open requests as follows:
Policies and Procedures Related to BAM Customer Assets (RFP Nos. 1, 4, 5;
Interrogatory No. 6): You made several requests related to the policies and procedures concerning
BAM Customer Assets, including that BAM (i) identify the policies currently in place; (ii)
summarize how policies are conveyed to employees; (iii) identify the commentor on Binance.US
Digital Asset & Custody Security Standard; (iv) identify who received the Device Management
and Handling Procedures and whether it is still in place; and (v) explain when revised policies will
be finalized and produced. While these requests are more appropriate lines of inquiry for
depositions, we have conferred with BAM personnel and provide the following responses:
First, the policies produced to date remain in place, including the Binance.US Digital Asset
& Custody Operations Policy (BAM_SEC_LIT_00000001); Device Management and Handling
Procedures (BAM_SEC_LIT_00000021); Binance.US Business Continuity and Disaster
Recovery
Plan
(BAM_SEC_LIT_00000043);
Binance.US
Risk
Methodology
(BAM_SEC_LIT_00000094);
and
Binance.US
Vendor
Due
Diligence
Policy
PDF Page 5
Case 1:23-cv-01599-ABJ Document 95-9 Filed 08/14/23 Page 4 of 8
WILMERHALE
Jennifer L. Farer and Matthew F. Scarlato
July 31, 2023
Page 3
(BAM_SEC_LIT_00000130). While the Binance.US Digital Asset & Custody Security Standard
policy is in draft form, BAM has summarized the procedures concerning the security of Customer
Assets in other documents, including in the Declaration of Erik Kellogg and BAM’s responses to
the SEC’s First Set of Interrogatories. BAM also has policies focused on IT and cybersecurity.
While we do not understand the SEC to be focused on those policies, out of an abundance of
caution, we are producing them with this letter bearing Bates Nos. BAM_SEC_LIT_00000366
through BAM_SEC_LIT_00000903.
Second, BAM’s Security team, including Mr. Kellogg, BAM’s Chief Information Security
Officer, are responsible for ensuring that policies concerning Customer Assets are conveyed to the
appropriate BAM personnel. This occurs in a variety of ways, including through briefings,
communications, and making policies available to the necessary personnel. For security purposes,
BAM’s policies concerning Customer Assets are conveyed to employees on a need-to-know basis.
Third, the commentor on the Binance.US Digital Asset & Custody Security Standard,
previously produced bearing Bates Nos. BAM_SEC_LIT_00000104, is Mr. Kellogg, and we are
producing the native draft document with this letter. As to the “Users” and “Requestors” identified
in the draft, those functions are filled by members of the Clearing Team as described in our July
7, 2023 correspondence.
Fourth, BAM’s Security team provided the Device Management and Handling Procedures
to the holders of the New Private and Administrative Keys. BAM’s Security team also briefed
those individuals on the procedures and best practices for security regarding the New Private and
Administrative Keys. As noted, the Device Management and Handling Procedures remain in
place.
Finally, as you know, BAM is in the process of revising its policies, which involves
drafting and/or review by BAM’s Security team and appropriate BAM executives. There is no set
timeline in place for approval of the revised policies.
●
Custody of Customer Assets (RFP Nos. 6-8, 20): You requested additional
materials relating to BAM’s banking arrangements, including account opening documents and
bank statements. BAM is conducting a search for responsive documents during the relevant time
period (November 2022 to present) involving its banking partners—including (i) Prime
Trust/Cross River Bank; (ii) Axos; (iii) BitGo/Customers Bank; (iv) Orum/Silicon Valley Bank;
(v) Nuvei/Fresno First Bank; (vi) Wyre; and (vii) Aegis—and will complete its production this
week.
●
Old and New Private and Administrative Keys (Interrogatory No. 2): You
requested the dates when individuals held the Private and Administrative Keys and New Private
and Administrative Keys. BAM will respond to this request this week.
PDF Page 6
Case 1:23-cv-01599-ABJ Document 95-9 Filed 08/14/23 Page 5 of 8
WILMERHALE
Jennifer L. Farer and Matthew F. Scarlato
July 31, 2023
Page 4
●
Prior BHL/Zhao Employment (Interrogatory No. 4): You requested that BAM
identify the dates when BAM employees were employed by BHL and/or Zhao. BAM continues
to believe that this information is not within the relevant scope of the Consent Order.
●
BAM’s Ownership Interests (Interrogatory No. 5): BAM is producing a document
bearing Bates Nos. BAM_SEC_LIT_00000904 through BAM_SEC_LIT_00000908 identifying
the Series Seed Investors who have an ownership interest in BAM Management US Holdings Inc.
●
Wallet Custody Agreement (Interrogatory No. 9): As we have explained, the
Wallet Custody Agreement was never fully operationalized. To the extent that there are services
listed in the Wallet Custody Agreement that were provided under the Software Licensing
Agreement, we believe that relevant individuals have been fully identified in responses to other
requests.
●
Audit-Related Requests (RFP Nos. 26, 27; Interrogatory Nos. 10-11): We do not
intend to produce documents in response to your requests for “All Documents and
Communications” related to audit-related materials absent the SEC limiting those requests, which
you have declined to do. We remain willing to discuss audit-related issues with you but are unable
to move those requests forward without further dialogue.
●
Custody of Assets Outside the United States (Interrogatory No. 12): Pursuant to
the Consent Order, BAM has confirmed that it maintains possession, custody, and control in the
United States of all Customer Assets. BAM does not believe that the SEC’s request for
information concerning historical asset custody practices and the reason for those practices is
within the relevant scope of or proportional to the needs of the Consent Order. Absent further
dialogue with the SEC on this Interrogatory, BAM will not produce documents or provide
information in response to it.
●
Sigma Chain and Merit Peak (Interrogatory No. 14): You asked for more
information concerning the roles of Sigma Chain and Merit Peak, including their role with respect
to security and control over Customer Assets. As we explained in BAM’s responses to the SEC’s
Interrogatories, Merit Peak no longer operates on BAM’s platform and, thus, we do not believe
discovery requests directed toward Merit Peak’s historical role on BAM’s platform (which was to
act as a market maker) are within the relevant scope of or proportional to the needs of the Consent
Order. Moreover, Merit Peak did not have a role with respect to the possession, custody, or control
of Customer Assets.
Sigma Chain is a public limited company formed in Switzerland in January 2019.
Although BAM and Sigma Chain share a common beneficial owner, they are entirely independent,
with separate management, personnel, offices, and infrastructure. Sigma Chain has historically
played several roles on BAM’s platform.
PDF Page 7
Case 1:23-cv-01599-ABJ Document 95-9 Filed 08/14/23 Page 6 of 8
WILMERHALE
Jennifer L. Farer and Matthew F. Scarlato
July 31, 2023
Page 5
First, a Sigma Chain trading unit has acted as a market maker on BAM’s platform. We
understand that its strategy was entirely automated and intended to passively post two-sided quotes
in the instruments in which it traded. For several months between in 2022, we understand that
Sigma Chain also implemented an independent arbitrage strategy on the platform, which traded
heavily in stablecoins and other price-linked tokens.
Second, in addition to its trading platform, BAM offers customers access to a “One Click
Buy-Sell” (“OCBS”) window. This window allows retail participants to request a price, which is
valid for 30 seconds, to purchase or sell listed assets, without navigating through the active order
book. We understand that a different, independent Sigma Chain algorithm has acted as the
counterparty for this feature. If a customer accepted the price offered by Sigma Chain, the OCBS
algorithm executed the trade, and then exited the position via BAM’s order book.
Third, BAM offers institutional customers access to an over-the-counter (“OTC”) window
to execute large positions. A fourth, independent Sigma Chain algorithm has acted as the
counterparty for this feature. Like the OCBS window, the OTC algorithm provides quotes to
interested customers to immediately buy or sell “block” size orders in supported assets. If the
customer accepts the price, the OTC algorithm exits the position via the BAM Trading order book.
Depending on the size of the trade and the liquidity in the market, this hedging activity could be
conducted in multiple orders over time.
Related to these on-platform roles, Sigma Chain has also served as a counterparty for onchain “network swaps,” which involve exchanging an asset on one blockchain network—generally
a stablecoin—for the same quantity of the same asset on another blockchain network. These swaps
are necessary to manage inventory to facilitate customer withdrawals across networks for tokens
traded on multiple blockchains. Sigma Chain does not charge BAM for this service.
We are not aware of Sigma Chain serving in any other role on BAM’s platform during the
relevant time period. Moreover, as we previously explained, Sigma Chain has not and does not
have a role in the possession, custody, or control of Customer Assets.
●
Digital Asset Policies and Procedures (Interrogatory No. 22): You requested that
BAM provide additional information concerning the creation of the New Private and
Administrative Keys and security protocols related to them. As of the date of this letter, BAM has
created new cold wallets with New Private and Administrative Keys. The New Private and
Administrative Keys were created in consultation with Ceffu, and BAM submits that inquiries
concerning how Ceffu creates wallets should be directed to Ceffu. As noted earlier, BAM’s
security protocols concerning the New Private and Administrative Keys are summarized in the
Device Management and Handling Procedures and overseen by BAM’s Security team and CISO.
PDF Page 8
Case 1:23-cv-01599-ABJ Document 95-9 Filed 08/14/23 Page 7 of 8
WILMERHALE
Jennifer L. Farer and Matthew F. Scarlato
July 31, 2023
Page 6
●
Format of Document Productions: BAM is reviewing its prior productions to
ensure that their format complies with applicable law. To the extent that BAM determines that the
reproduction of materials is necessary, it will do so during the week of August 7, 2023.
●
BAM’s Objections to Other Requests: You requested that BAM identify any
requests for which it does not intend to produce documents. As noted above, BAM does not intend
to produce documents or information in response to requests for audit-related materials or
information concerning historical asset custody practices. BAM has otherwise substantively
responded to all the requests made during our meet and confers and is willing to consider
additional, tailored requests. However, BAM maintains its objections to searching for or
producing materials in response to requests for “All Documents and Communications Concerning”
various topics and similarly worded requests.
*
*
*
Please let us know if you have any questions. We otherwise request that you schedule
depositions with Mr. Kellogg and Ms. Sisenwein, which we believe would help address your
concerns.
Very truly yours,
/s/ Matthew Beville
Matthew Beville
Enclosure
PDF Page 9
Case 1:23-cv-01599-ABJ Document 95-9 Filed 08/14/23 Page 8 of 8
Exhibit A
Bates Range
Request No.
Interrogatory No.
BAM_SEC_LIT_00000104
(native draft document)
1, 4, 5
6
BAM_SEC_LIT_00000366BAM_SEC_LIT_00000903
1, 4, 5
6
BAM_SEC_LIT_00000904BAM_SEC_LIT_00000908
N/A
5
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