REDACTED DOCUMENT- Exhibits of Matthew Beville Declaration to[124] Order on Sealed Motion for Leave to File Document Under Seal,,, Exhibit A (Redacted) by BAM MANAGEMENT US HOLDINGS INC., BAM TRADING SERVICES INC.. (Attachments: # (1) Exhibit B (Redacted), # (2) Exhibit C (Redacted), # (3) Exhibit D (Redacted), # (4) Exhibit E (Redacted), # (5) Exhibit F (Redacted))(McLucas, William)
Page 1 Declaration of Matthew
Beville Ex. APage 2 EXHIBIT 3Page 3 William R. McLucas
FOIA CONFIDENTIAL TREATMENT REQUESTED BY
BAM TRADING SERVICES INC. PURSUANT TO
17 C.F.R. § 200.83 AND 5 U.S.C. §
+1 202 663 6622 (t)
+1 202 663 6363 (f)
william.mclucas@wilmerhale.com
June 1, By Email
Jennifer Farer, Esq.
Senior Trial Counsel
Division of Enforcement
U.S. Securities and Exchange Commission
100 F St NE
Washington, DC Re:
In the Matter of Binance.US (HO-13865)
Dear Ms. Farer:
We write on behalf of BAM Trading Services Inc. (“BAM Trading” or the “Company”) in
response to your May 30, 2023 letter request seeking additional information regarding the fiat
currency and digital (crypto) assets BAM Trading holds on behalf of its customers. We reiterate,
based on our discussions with the Company that, as set forth below, customers’ assets are secure,
appropriately segregated, and available for immediate withdrawal, subject to transaction limits
imposed by the Company’s banking partners and, for staked assets, any applicable unbonding
periods.
We believe that we had addressed any concerns raised by the Staff in a conference call on
Wednesday, May 24th, a follow-up writing confirming that conversation on Thursday, May 25th,
and an additional submission on Friday, May 26th. Based on these representations and on our
cooperation, we were both surprised and disappointed to receive the May 30th letter calling for the
production of a witness and responses to 26 separate questions in less than 48 hours. Given that
the Staff has already sought and obtained authority for an enforcement action against BAM
Trading, such a demand is extraordinary under any circumstances. Nonetheless we have
committed to making every effort to respond to the Staff’s concerns as expeditiously as possible.
To be clear, it is the Company’s top priority to protect customers and to avoid anything that might
cause unwarranted panic in the already volatile crypto market.
Today we are responding to Items 2, 3, 5, 6, 7, 8, 9, 18(i), 23, 25, and 26 of your request.
We understand that these responses are a high priority for the Staff and are working expeditiously
to respond to the remaining items from your letter as soon as possible. We are making every effort
to ensure that our responses are complete and accurate notwithstanding the extremely shortPage 4 Jennifer Farer, Esq.
June 1, deadlines allotted to provide this information. We will supplement our responses to the extent that
we identify any additional responsive information. The Company remains ready to provide
additional information the Staff may need to understand how the Company maintains custody of
its clients’ assets and to assure you that those assets are safe, secure, and immediately available to
satisfy customers’ requests to withdraw or transfer assets.
Request Item 2(a), (b) & (c): List the institutions and account information to which the
$9,830,818.40 of customer funds that are currently held at Prime Trust are to be transferred, as
referenced in your Letter [and] [e]xplain why these assets are being transferred; who will have
control over those funds and/or authority to transfer or withdraw funds from the account(s) [and]
the extent to which Zhao or any individual with any agreement Holdings, Zhao, any Zhao-owned
or –controlled entity has or will have authority, formally or informally, directly or indirectly, to
control, transfer, or withdraw these funds, or other relationship with Binance; and [c]onfirm those
funds will be segregated, unencumbered, and subject to immediate withdrawal by customers.
Prime Trust is one of the Company’s payment processors. One of its banking partners is
Cross River Bank, where funds on behalf of BAM Trading’s customers were previously
maintained. We understand from Prime Trust, that Cross River Bank would no longer hold assets
on behalf of BAM Trading and potentially other clients due to the stresses faced by regional banks
and the ongoing regulatory environment. As a result, BAM Trading stopped transacting through
Prime Trust on April 28, 2023 and has migrated its accounts away from Prime Trust to new
payment processors, including Nuvei US LLC (“Nuvei”) and Orum Money Movement (“Orum”).
As of May 25, 2023, $9,830,818.40 of the Company’s customer fiat was maintained with
Prime Trust’s banking partner, Cross River Bank in
On May 31, 2023, the
full balance of $9,830,818.40 was transferred to Wyre Payments Inc. (“Wyre”), a new payment
processor through which BAM Trading customers can process wire transfers. The customer funds
are unencumbered and available for immediate withdrawal by customers, subject to any periodic
withdrawal limits imposed by Wyre’s banking partner.
Only BAM Trading personnel1 and Wyre employees have access to and control of accounts
holding customer funds. Neither Mr. Zhao nor anyone at BHL or other entities controlled by Mr.
Zhao can withdraw or transfer funds from Wyre or other accounts used to hold fiat currency on
behalf of BAM Trading’s customers.
BAM Trading personnel are employed by BAM Management US Holdings Inc. (“BAM Management”).
As you are aware, Mr. Zhao owns, directly or indirectly, a controlling interest in the Company and BAM
Management. However, for purposes of this response and other items seeking similar information, we assume that
you are asking about Mr. Zhao or other entities that he controls, and not whether BAM Trading personnel have control
over the Company’s accounts. To the extent than an entity owned or controlled by Mr. Zhao maintains an account on
the platform, it of course retains the ability to transfer or withdraw its own funds to the same extent as any other
customer.
Confidential Treatment Requested by BAM Trading Services Inc.
BAM-WH-CORR-039Page 5 Jennifer Farer, Esq.
June 1, Request Item 3(a): What is the role of the “payment processors” Nuvei, Orum, and BitGO
referenced in response to Request 5? Explain all agreements governing the relationships with
these entities, including those that explain why they have accounts holding BAM customer fiat and
the terms governing their custody or control of BAM customer fiat.
Payment processors such as Nuvei, Orum Wyre, and BitGo Trust Company (“BitGo”)
provide the infrastructure and technology to facilitate financial transactions between BAM Trading
and customers across various channels, such as ACH, debit card and wire deposits and
withdrawals. Payment processors have relationships with various bank partners. The bank
partners maintain bank accounts for the payment processors, and the assets of the payment
processor’s customers are maintained in these accounts (i.e., the assets BAM or its customer sends
to a payment processor are deposited with a banking partner). These types of arrangements are
commonly referred to as “bank-fintech” partnerships.
The BitGo agreement is a Custodial Services Agreement between BAM Trading and
BitGo. BitGo is a Trust Company organized and chartered in South Dakota. The agreement
enables BAM Trading to create a custody account controlled and secured by BitGo for the
purposes of storing digital assets and fiat. As relevant here, BAM Trading uses BitGo to hold
certain fiat currency deposited by customers that have not had any account activity over the prior
12 months. BitGo currently holds $4 million in fiat currency for those inactive customers.
The Orum agreement enables BAM Trading to use Orum’s proprietary platform to enable
BAM Trading customers to transfer funds between existing U.S. bank accounts by way of ACH
and wire payment methods.
The Nuvei agreements enable BAM Trading to process debit card, ACH, and RTP
transactions for the loading and unloading of customer wallets.
The Wyre agreement enables BAM Trading customers to initiate ACH, wire, and debit
card payments for the loading and unloading of customer wallets.
Request Item 3(b): Describe BAM Trading’s, BAM Management’s, Binance Holdings’,
and Zhao’s access to and control over these accounts and customer funds held in these accounts,
either directly or indirectly.
Movements between BAM Trading’s BitGo, Nuvei, Orum, and Wyre accounts are directed
by BAM Trading customers or by a list of designated BAM Trading personnel. We understand
that BitGo, Nuvei, Orum, and Wyre also have designated signatories for the underlying bank
accounts used to facilitate their services. We will provide more detail regarding these
arrangements in response to Item 1(b).
Confidential Treatment Requested by BAM Trading Services Inc.
BAM-WH-CORR-040Page 6 Jennifer Farer, Esq.
June 1, Request Item 5 & 5(a): What is B.US Securities and its role for Binance.US or
Binance.com trading or other services provided to customers; [and] [d]oes B.US Securities
account hold any BAM customer assets?
B.US Securities, Inc. (“B.US Securities”) is a subsidiary of BAM Management. It was
established with a goal of providing appropriately approved Binance.US customers access to
equity securities. The entity currently has a broker-dealer application pending with FINRA. It is
not currently operational and does not have any clients or custody of client funds. As reflected in
BTS00833830, B.US Securities has established a bank account at Axos Bank. This account is
exclusively used to hold B.US Securities’ corporate funds as it works to stand-up its operations.
BHL, Binance.com, and Mr. Zhao (other than his ultimate ownership of BAM
Management) do not have any involvement in B.US Securities.
Request Item 5(b) & (c): Identify the company(ies) with whom Sara Andres and David
Martin have any employment or other agreement and their respective roles with those
company(ies); and [e]xplain the extent to which Zhao or any individual with any agreement or
other relationship with Binance Holdings, Zhao, BAM Trading, BAM Management, or any Zhaoowned or controlled entity has authority to control, transfer, or withdraw assets from B.US
Securities accounts.
David Martin is the Founder and Chief Executive Officer and Sara Andres is a Senior
Consultant at Compliers Consulting Services LLC (“Compliers Consulting”), a consulting firm
specializing in compliance services for broker-dealer firms. B.US Securities engaged Mr. Martin
and Ms. Andres to, respectively, act as B.US Securities’ President and Chief Compliance Officer.
As the licensed principals of B.US Securities, only Ms. Andres and Mr. Martin have the ability to
conduct the operations of and have control over B.US Securities.
As noted above, neither Mr. Zhao, or any individual with any agreement or other
relationship with Binance Holdings, Mr. Zhao, BAM Trading, BAM Management, or any other
Mr. Zhao-controlled entity has any authority to control, transfer or withdraw assets from the B.US
Securities account. Only Mr. David Martin and Ms. Sara Andres, as FINRA licensed principals,
have the ability and authority to control, transfer or withdraw assets from the B.US Securities
account, which only holds proprietary funds.
Request Item 6: Explain why Paxos Trust Company transferred $183M to BAM Trading
in January 2023.
BAM Management US Holdings, Inc. issued a $250 million convertible note to Mr. Zhao
in December 2022. Mr. Zhao funded the purchase of this note with BUSD, $183 million of which
was sent to Paxos Trust Company, as issuer of BUSD, to convert the BUSD into USD. These
funds were then transferred to BAM Trading in January 2023.
Confidential Treatment Requested by BAM Trading Services Inc.
BAM-WH-CORR-041Page 7 WILMERHALE
Jennifer Farer, Esq.
June 1,
Request Item 7: Provide account information for all accounts holding any funds identified
in the “Restricted Cash” section of the Financial Statements and Independent Auditor’s Report
(“FGMK Report”) at BTS00833810.
A table reflecting the funds identified as “Restricted Cash” in BAM Trading’s 2022 audited
financial statements is provided below:
Institution Account No. Account Name Balance
Signature Bank Po BAM TRADING $6,004,SERVICES INC
ACH
COLLATERAL
Silvergate Capital | BAM TRADING $6,750,Corp. SERVICES INC.
DBA BINANCE.US
Acquiom | (Voyager Digital $10,000,Clearinghouse LLC BAM Escrow?
(escrow agent)/HSBC
Bank
Total: $22,754,
Request Item 8: Provide documentation as to and otherwise explain the referenced
December 2022 termination of the Wallet Custody agreement.
As we explained on March 6, 2023 and March 9, 2023, we understand that the Wallet
Custody Agreement was never operationalized. However, as a formality, the respective parties
terminated the agreement on December 30, 2022. A copy of the termination is enclosed at
BTS00833831.
Request Item 18(i): Confirm no individual holds multiple key shards.
Confirmed, all seven TSS key shards for Binance.US’ TSS enabled cold wallets are held
by seven separate individual key shardholders.
3 This was a deposit for the proposed Asset Purchase Agreement of certain Voyager assets. The transaction
was terminated and BAM Trading will seek a return of the deposit.
Confidential Treatment Requested by BAM Trading Services Inc. BAM-WH-CORR-042Page 8 WILMERHALE
Jennifer Farer, Esq.
June 1,
Request Item 23: Identify the number of BAM Trading or BAM Management employees
located outside of the United States and the city and country where they are located, including
those BAM employees located in Singapore.
The following chart identifies the number of BAM Trading and BAM Management
employees and contractors that are located outside of the United States:
Employees
Country City Contractors (FTE, PTE & Total
Interns)
Argentina Banfield
Canada Brampton
Burnaby
Coquitlam
Delta
Langley
London
Markham
Mississauga
New Westminster
North Vancouver
North York
Port Moody
Richmond
Surrey
Toronto
Vancouver
Wasaga Beach
West Vancouver
China Beijing
Minhang
NanChang
Qingpu
Shanghai
Songjiang
Wuxi
Zhejiang
Costa Rica Alajuela
Heredia
San José
San Pablo de Barva
Cyprus Limassol
a
a
_—
_—
—
Oo
RP [BPR Rel Re Ree lR Le RL OlLOLOlOlLOlOlOlOlO] RK |OlOlOlOlOlO]/O;oO|eK
Oo
EPR YB Pe ee Pe pe fe Pe eR ee eee re ae ore pay
SIOLOLOJOJPOslO SOOO PO JOO IN] eH |B] MV fe fe eR LOR LW LR JR | | O
Confidential Treatment Requested by BAM Trading Services Inc. BAM-WH-CORR-043Page 9 WILMERHALE
Jennifer Farer, Esq.
June 1, Employees
Country City Contractors (FTE, PTE & Total
Interns)
France Saint-Etienne 1 0 Indonesia Bekasi 1 0 Mexico Mexico City 1 0 Philippines Antipolo City 1 0 Singapore Singapore 1 0 United Arab Al Reem Island 1 0 Emirates Dubai 14 0 Total 151 92
Request Item 25: Zhe FGMK Report indicates BAM Trading’s lease expires at the end of
May 2023. See BTS00833819. Provide information on BAM’s place(s) of business from the date
of lease termination.
BAM Trading recently relocated its headquarters from Palo Alto, California, to Miami,
Florida. Its Palo Alto lease expires at the end of May 2023. The Company’s new headquarters is
located at 252 NW 29" Street, Suite 904, Miami, FL 33127.
Request Item 26: Explain why certain fiat and crypto assets are identified as “off-
balance” in the FGMK Report. See BTS00833817-18.
For accounting purposes, BAM Trading treats all fiat and digital assets held on behalf of
its customers as off-balance sheet assets. We understand that this has historically been the accepted
method of accounting for custodial assets held on behalf of third-party customers. As of December
31, 2022 BAM Trading disclosed customer fiat assets of $278,790,229 and customer crypto assets
of $1,778,308,784 as off-balance sheet. This treatment is reflected in Notes 1 and 5 of its audited financial statements.
As reflected in the Company’s 2022 audited financial statements, the Company is aware
that Staff Accounting Bulletin No. 121 (“SAB 121”) requires public companies that hold custodial
digital assets on behalf of customers to recognize a liability reflecting their obligation to safeguard
their customers’ assets and a corresponding safeguarding asset, both of which must be accounted
for at fair value. BAM Trading is not a public entity and is not required to adopt the approach
suggested by SAB 121. The Company is evaluating whether to adopt this approach going forward.
% * *
BAM Trading requests that this letter and all information contained therein (the
“Confidential Material”) be maintained in confidence by the SEC and its staff and be used solely
for the purposes of this inquiry. Accordingly, the Confidential Material has been marked
Confidential Treatment Requested by BAM Trading Services Inc. BAM-WH-CORR-044Page 10 Jennifer Farer, Esq.
June 1, “Confidential Treatment Requested by BAM Trading Services Inc.” for reasons of personal
privacy and business confidentiality.
The Confidential Material concerns or may concern customarily non-public, confidential
and privileged business, financial, commercial, and personal information concerning BAM
Trading and/or its personnel. The Confidential Material is exempt from mandatory disclosure
under various provisions of the Freedom of Information Act (“FOIA”), including 5 U.S.C. §
552(b)(7) (which protects certain “records or information compiled for law enforcement
purposes”),4 5 U.S.C. § 552(b)(4) (which protects trade secrets as well as confidential commercial
or financial information obtained from a person), 5 U.S.C. § 552(b)(6) (which protects files “the
disclosure of which would constitute a clearly unwarranted invasion of personal privacy”), 5 and U.S.C. § 552(b)(7) (which protects records or information compiled for law enforcement
purposes). Because the Confidential Material relates to the activities of BAM Trading and not the
activities of any federal agency, we believe it is exempt from disclosure under FOIA. 6 The
Commission treats records falling within the FOIA exemption categories to be “nonpublic” and
“will generally not publish or make available to any person” such records. 17 C.F.R. § 200.80(b).
Moreover, disclosure of this Confidential Material may be prohibited under 18 U.S.C. § 1905, and
further protections may be available under the Privacy Act of 1974, 5 U.S.C. § 552a. Finally, the
Confidential Material being produced voluntarily is protected from disclosure because it would
not customarily be released to the public by BAM Trading. In accordance with 17 C.F.R. § 200.83 and other applicable laws and regulations, the
Confidential Material is submitted to the SEC with BAM Trading’s request, through the
undersigned, that it be kept in a non-public file and that only SEC staff have access to it. If any
person not a member of the SEC staff (including without limitation any governmental employee)
should request an opportunity to inspect or copy the Confidential Material, pursuant to FOIA or
otherwise, or if you or any member of the SEC staff contemplates disclosure of the Confidential
Material to any other person, we request that the undersigned immediately be notified of such
request, be furnished a copy of all written materials pertaining to such request (including but not
limited to the request itself), and be given advance notice of any intended release so that we may,
if deemed necessary or appropriate, pursue any remedies available. See, e.g., Chrysler Corp. v.
Brown, 441 U.S. 281 (1979). We expect to be given the opportunity to object to such disclosure.
We request that you telephone the undersigned rather than rely upon the U.S. mail for such notice.
See, e.g., NLRB v. Robbins Tire & Rubber Co., 437 U.S. 214 (1978).
See, e.g., U.S. Dep’t of Def. v. Federal Labor Relations Authority, 510 U.S. 487 (1994).
5 U.S.C. §§ 552(b)(6) and (b)(7)(C); U.S. Dep’t of Def., supra; see, e.g., U.S. Dep’t of Justice v. Reporters
Comm. for Freedom of Press, 489 U.S. 449 (1989).
See, e.g., Critical Mass Energy Project v. Nuclear Regulatory Comm’n, 975 F.2d 871 (D.C. Cir. 1992), cert.
denied, 507 U.S. 984 (1993).
Confidential Treatment Requested by BAM Trading Services Inc.
BAM-WH-CORR-045Page 11 Jennifer Farer, Esq.
June 1, Should the SEC be inclined to grant any FOIA request for the Confidential Material, BAM
Trading expects that the procedures set forth in 17 C.F.R. § 200.83 and Executive Order 12,600,
52 Fed. Reg. 23,781 (June 23, 1987), will be followed. In that case, BAM Trading will further
substantiate its request for confidential treatment, and will request a hearing on the claim of
exemption.
The requests set forth in the preceding paragraphs also apply to any form of communication
of any sort, including, but not limited to any tapes, memoranda, notes, transcripts, electronic
documents, or communications containing extracts, summaries, or quotes, or other writings of any
sort whatsoever that are made by, or at the request of, any employee of the SEC (or any other
governmental agency) and which (1) incorporate, include or relate to any of the Confidential
Material; or (2) refer to any conference, meeting, or telephone conversation between BAM
Trading, its current or former employees, representatives, agents, auditors, or counsel on the one
hand and employees of the SEC (or any other government agency) on the other, relating to the
Confidential Material.
The Confidential Material remains the property of BAM Trading. If the SEC staff
determines to transfer any of the Confidential Material to another federal agency, we request that
you forward a copy of this letter to any such agency with the Confidential Material. We request
that you indicate to any such agency that BAM Trading has requested the return of this material to
the undersigned at the completion of the agency’s efforts in this matter and has requested that this
material be accorded confidential treatment.
Provision of the Confidential Material is not intended to, and does not, waive any
applicable privilege or other legal basis under which information may not be subject to production.
If it were found that production of the Confidential Material constitutes disclosure of otherwise
privileged matters, such disclosure would be inadvertent. By the productions of such documents,
BAM Trading does not intend to and has not waived the attorney-client privilege or any other
protections.
*
*
*
Please feel free to contact me if you have any questions about these matters.
Sincerely,
/s/ William R. McLucas
William R. McLucas
Confidential Treatment Requested by BAM Trading Services Inc.
BAM-WH-CORR-046
PDF Page 1
PlainSite Cover Page
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Case 1:23-cv-01599-ABJ-ZMF Document 140 Filed 10/03/23 Page 1 of 11
Declaration of Matthew
Beville Ex. A
PDF Page 3
Case 1:23-cv-01599-ABJ-ZMF Document 140 Filed 10/03/23 Page 2 of 11
EXHIBIT 3
PDF Page 4
Case 1:23-cv-01599-ABJ-ZMF Document 140 Filed 10/03/23 Page 3 of 11
William R. McLucas
FOIA CONFIDENTIAL TREATMENT REQUESTED BY
BAM TRADING SERVICES INC. PURSUANT TO
17 C.F.R. § 200.83 AND 5 U.S.C. § 552
+1 202 663 6622 (t)
+1 202 663 6363 (f)
william.mclucas@wilmerhale.com
June 1, 2023
By Email
Jennifer Farer, Esq.
Senior Trial Counsel
Division of Enforcement
U.S. Securities and Exchange Commission
100 F St NE
Washington, DC 20549
Re:
In the Matter of Binance.US (HO-13865)
Dear Ms. Farer:
We write on behalf of BAM Trading Services Inc. (“BAM Trading” or the “Company”) in
response to your May 30, 2023 letter request seeking additional information regarding the fiat
currency and digital (crypto) assets BAM Trading holds on behalf of its customers. We reiterate,
based on our discussions with the Company that, as set forth below, customers’ assets are secure,
appropriately segregated, and available for immediate withdrawal, subject to transaction limits
imposed by the Company’s banking partners and, for staked assets, any applicable unbonding
periods.
We believe that we had addressed any concerns raised by the Staff in a conference call on
Wednesday, May 24th, a follow-up writing confirming that conversation on Thursday, May 25th,
and an additional submission on Friday, May 26th. Based on these representations and on our
cooperation, we were both surprised and disappointed to receive the May 30th letter calling for the
production of a witness and responses to 26 separate questions in less than 48 hours. Given that
the Staff has already sought and obtained authority for an enforcement action against BAM
Trading, such a demand is extraordinary under any circumstances. Nonetheless we have
committed to making every effort to respond to the Staff’s concerns as expeditiously as possible.
To be clear, it is the Company’s top priority to protect customers and to avoid anything that might
cause unwarranted panic in the already volatile crypto market.
Today we are responding to Items 2, 3, 5, 6, 7, 8, 9, 18(i), 23, 25, and 26 of your request.
We understand that these responses are a high priority for the Staff and are working expeditiously
to respond to the remaining items from your letter as soon as possible. We are making every effort
to ensure that our responses are complete and accurate notwithstanding the extremely short
PDF Page 5
Case 1:23-cv-01599-ABJ-ZMF Document 140 Filed 10/03/23 Page 4 of 11
Jennifer Farer, Esq.
June 1, 2023
deadlines allotted to provide this information. We will supplement our responses to the extent that
we identify any additional responsive information. The Company remains ready to provide
additional information the Staff may need to understand how the Company maintains custody of
its clients’ assets and to assure you that those assets are safe, secure, and immediately available to
satisfy customers’ requests to withdraw or transfer assets.
Request Item 2(a), (b) & (c): List the institutions and account information to which the
$9,830,818.40 of customer funds that are currently held at Prime Trust are to be transferred, as
referenced in your Letter [and] [e]xplain why these assets are being transferred; who will have
control over those funds and/or authority to transfer or withdraw funds from the account(s) [and]
the extent to which Zhao or any individual with any agreement Holdings, Zhao, any Zhao-owned
or –controlled entity has or will have authority, formally or informally, directly or indirectly, to
control, transfer, or withdraw these funds, or other relationship with Binance; and [c]onfirm those
funds will be segregated, unencumbered, and subject to immediate withdrawal by customers.
Prime Trust is one of the Company’s payment processors. One of its banking partners is
Cross River Bank, where funds on behalf of BAM Trading’s customers were previously
maintained. We understand from Prime Trust, that Cross River Bank would no longer hold assets
on behalf of BAM Trading and potentially other clients due to the stresses faced by regional banks
and the ongoing regulatory environment. As a result, BAM Trading stopped transacting through
Prime Trust on April 28, 2023 and has migrated its accounts away from Prime Trust to new
payment processors, including Nuvei US LLC (“Nuvei”) and Orum Money Movement (“Orum”).
As of May 25, 2023, $9,830,818.40 of the Company’s customer fiat was maintained with
Prime Trust’s banking partner, Cross River Bank in
On May 31, 2023, the
full balance of $9,830,818.40 was transferred to Wyre Payments Inc. (“Wyre”), a new payment
processor through which BAM Trading customers can process wire transfers. The customer funds
are unencumbered and available for immediate withdrawal by customers, subject to any periodic
withdrawal limits imposed by Wyre’s banking partner.
Only BAM Trading personnel1 and Wyre employees have access to and control of accounts
holding customer funds. Neither Mr. Zhao nor anyone at BHL or other entities controlled by Mr.
Zhao can withdraw or transfer funds from Wyre or other accounts used to hold fiat currency on
behalf of BAM Trading’s customers.2
1
BAM Trading personnel are employed by BAM Management US Holdings Inc. (“BAM Management”).
2
As you are aware, Mr. Zhao owns, directly or indirectly, a controlling interest in the Company and BAM
Management. However, for purposes of this response and other items seeking similar information, we assume that
you are asking about Mr. Zhao or other entities that he controls, and not whether BAM Trading personnel have control
over the Company’s accounts. To the extent than an entity owned or controlled by Mr. Zhao maintains an account on
the platform, it of course retains the ability to transfer or withdraw its own funds to the same extent as any other
customer.
Confidential Treatment Requested by BAM Trading Services Inc.
BAM-WH-CORR-039
PDF Page 6
Case 1:23-cv-01599-ABJ-ZMF Document 140 Filed 10/03/23 Page 5 of 11
Jennifer Farer, Esq.
June 1, 2023
Request Item 3(a): What is the role of the “payment processors” Nuvei, Orum, and BitGO
referenced in response to Request 5? Explain all agreements governing the relationships with
these entities, including those that explain why they have accounts holding BAM customer fiat and
the terms governing their custody or control of BAM customer fiat.
Payment processors such as Nuvei, Orum Wyre, and BitGo Trust Company (“BitGo”)
provide the infrastructure and technology to facilitate financial transactions between BAM Trading
and customers across various channels, such as ACH, debit card and wire deposits and
withdrawals. Payment processors have relationships with various bank partners. The bank
partners maintain bank accounts for the payment processors, and the assets of the payment
processor’s customers are maintained in these accounts (i.e., the assets BAM or its customer sends
to a payment processor are deposited with a banking partner). These types of arrangements are
commonly referred to as “bank-fintech” partnerships.
The BitGo agreement is a Custodial Services Agreement between BAM Trading and
BitGo. BitGo is a Trust Company organized and chartered in South Dakota. The agreement
enables BAM Trading to create a custody account controlled and secured by BitGo for the
purposes of storing digital assets and fiat. As relevant here, BAM Trading uses BitGo to hold
certain fiat currency deposited by customers that have not had any account activity over the prior
12 months. BitGo currently holds $4 million in fiat currency for those inactive customers.
The Orum agreement enables BAM Trading to use Orum’s proprietary platform to enable
BAM Trading customers to transfer funds between existing U.S. bank accounts by way of ACH
and wire payment methods.
The Nuvei agreements enable BAM Trading to process debit card, ACH, and RTP
transactions for the loading and unloading of customer wallets.
The Wyre agreement enables BAM Trading customers to initiate ACH, wire, and debit
card payments for the loading and unloading of customer wallets.
Request Item 3(b): Describe BAM Trading’s, BAM Management’s, Binance Holdings’,
and Zhao’s access to and control over these accounts and customer funds held in these accounts,
either directly or indirectly.
Movements between BAM Trading’s BitGo, Nuvei, Orum, and Wyre accounts are directed
by BAM Trading customers or by a list of designated BAM Trading personnel. We understand
that BitGo, Nuvei, Orum, and Wyre also have designated signatories for the underlying bank
accounts used to facilitate their services. We will provide more detail regarding these
arrangements in response to Item 1(b).
Confidential Treatment Requested by BAM Trading Services Inc.
BAM-WH-CORR-040
PDF Page 7
Case 1:23-cv-01599-ABJ-ZMF Document 140 Filed 10/03/23 Page 6 of 11
Jennifer Farer, Esq.
June 1, 2023
Request Item 5 & 5(a): What is B.US Securities and its role for Binance.US or
Binance.com trading or other services provided to customers; [and] [d]oes B.US Securities
account hold any BAM customer assets?
B.US Securities, Inc. (“B.US Securities”) is a subsidiary of BAM Management. It was
established with a goal of providing appropriately approved Binance.US customers access to
equity securities. The entity currently has a broker-dealer application pending with FINRA. It is
not currently operational and does not have any clients or custody of client funds. As reflected in
BTS00833830, B.US Securities has established a bank account at Axos Bank. This account is
exclusively used to hold B.US Securities’ corporate funds as it works to stand-up its operations.
BHL, Binance.com, and Mr. Zhao (other than his ultimate ownership of BAM
Management) do not have any involvement in B.US Securities.
Request Item 5(b) & (c): Identify the company(ies) with whom Sara Andres and David
Martin have any employment or other agreement and their respective roles with those
company(ies); and [e]xplain the extent to which Zhao or any individual with any agreement or
other relationship with Binance Holdings, Zhao, BAM Trading, BAM Management, or any Zhaoowned or controlled entity has authority to control, transfer, or withdraw assets from B.US
Securities accounts.
David Martin is the Founder and Chief Executive Officer and Sara Andres is a Senior
Consultant at Compliers Consulting Services LLC (“Compliers Consulting”), a consulting firm
specializing in compliance services for broker-dealer firms. B.US Securities engaged Mr. Martin
and Ms. Andres to, respectively, act as B.US Securities’ President and Chief Compliance Officer.
As the licensed principals of B.US Securities, only Ms. Andres and Mr. Martin have the ability to
conduct the operations of and have control over B.US Securities.
As noted above, neither Mr. Zhao, or any individual with any agreement or other
relationship with Binance Holdings, Mr. Zhao, BAM Trading, BAM Management, or any other
Mr. Zhao-controlled entity has any authority to control, transfer or withdraw assets from the B.US
Securities account. Only Mr. David Martin and Ms. Sara Andres, as FINRA licensed principals,
have the ability and authority to control, transfer or withdraw assets from the B.US Securities
account, which only holds proprietary funds.
Request Item 6: Explain why Paxos Trust Company transferred $183M to BAM Trading
in January 2023.
BAM Management US Holdings, Inc. issued a $250 million convertible note to Mr. Zhao
in December 2022. Mr. Zhao funded the purchase of this note with BUSD, $183 million of which
was sent to Paxos Trust Company, as issuer of BUSD, to convert the BUSD into USD. These
funds were then transferred to BAM Trading in January 2023.
Confidential Treatment Requested by BAM Trading Services Inc.
BAM-WH-CORR-041
PDF Page 8
Case 1:23-cv-01599-ABJ-ZMF Document 140 Filed 10/03/23 Page 7 of 11
WILMERHALE
Jennifer Farer, Esq.
June 1, 2023
Request Item 7: Provide account information for all accounts holding any funds identified
in the “Restricted Cash” section of the Financial Statements and Independent Auditor’s Report
(“FGMK Report”) at BTS00833810.
A table reflecting the funds identified as “Restricted Cash” in BAM Trading’s 2022 audited
financial statements is provided below:
Institution Account No. Account Name Balance
Signature Bank Po BAM TRADING $6,004,309
SERVICES INC
ACH
COLLATERAL
Silvergate Capital | BAM TRADING $6,750,000
Corp. SERVICES INC.
DBA BINANCE.US
Acquiom | (Voyager Digital $10,000,000
Clearinghouse LLC BAM Escrow?
(escrow agent)/HSBC
Bank
Total: $22,754,309
Request Item 8: Provide documentation as to and otherwise explain the referenced
December 2022 termination of the Wallet Custody agreement.
As we explained on March 6, 2023 and March 9, 2023, we understand that the Wallet
Custody Agreement was never operationalized. However, as a formality, the respective parties
terminated the agreement on December 30, 2022. A copy of the termination is enclosed at
BTS00833831.
Request Item 18(i): Confirm no individual holds multiple key shards.
Confirmed, all seven TSS key shards for Binance.US’ TSS enabled cold wallets are held
by seven separate individual key shardholders.
3 This was a deposit for the proposed Asset Purchase Agreement of certain Voyager assets. The transaction
was terminated and BAM Trading will seek a return of the deposit.
Confidential Treatment Requested by BAM Trading Services Inc. BAM-WH-CORR-042
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Case 1:23-cv-01599-ABJ-ZMF Document 140 Filed 10/03/23 Page 8 of 11
WILMERHALE
Jennifer Farer, Esq.
June 1, 2023
Request Item 23: Identify the number of BAM Trading or BAM Management employees
located outside of the United States and the city and country where they are located, including
those BAM employees located in Singapore.
The following chart identifies the number of BAM Trading and BAM Management
employees and contractors that are located outside of the United States:
Employees
Country City Contractors (FTE, PTE & Total
Interns)
Argentina Banfield
Canada Brampton
Burnaby
Coquitlam
Delta
Langley
London
Markham
Mississauga
New Westminster
North Vancouver
North York
Port Moody
Richmond
Surrey
Toronto
Vancouver
Wasaga Beach
West Vancouver
China Beijing
Minhang
NanChang
Qingpu
Shanghai
Songjiang
Wuxi
Zhejiang
Costa Rica Alajuela
Heredia
San José
San Pablo de Barva
Cyprus Limassol
a
a
_—
_—
—
Oo
RP [BPR Rel Re Ree lR Le RL OlLOLOlOlLOlOlOlOlO] RK |OlOlOlOlOlO]/O;oO|eK
Oo
EPR YB Pe ee Pe pe fe Pe eR ee eee re ae ore pay
SIOLOLOJOJPOslO SOOO PO JOO IN] eH |B] MV fe fe eR LOR LW LR JR | | O
Confidential Treatment Requested by BAM Trading Services Inc. BAM-WH-CORR-043
PDF Page 10
Case 1:23-cv-01599-ABJ-ZMF Document 140 Filed 10/03/23 Page 9 of 11
WILMERHALE
Jennifer Farer, Esq.
June 1, 2023
Employees
Country City Contractors (FTE, PTE & Total
Interns)
France Saint-Etienne 1 0 1
Indonesia Bekasi 1 0 1
Mexico Mexico City 1 0 1
Philippines Antipolo City 1 0 1
Singapore Singapore 1 0 1
United Arab Al Reem Island 1 0 1
Emirates Dubai 14 0 14
Total 151 92 243
Request Item 25: Zhe FGMK Report indicates BAM Trading’s lease expires at the end of
May 2023. See BTS00833819. Provide information on BAM’s place(s) of business from the date
of lease termination.
BAM Trading recently relocated its headquarters from Palo Alto, California, to Miami,
Florida. Its Palo Alto lease expires at the end of May 2023. The Company’s new headquarters is
located at 252 NW 29" Street, Suite 904, Miami, FL 33127.
Request Item 26: Explain why certain fiat and crypto assets are identified as “off-
balance” in the FGMK Report. See BTS00833817-18.
For accounting purposes, BAM Trading treats all fiat and digital assets held on behalf of
its customers as off-balance sheet assets. We understand that this has historically been the accepted
method of accounting for custodial assets held on behalf of third-party customers. As of December
31, 2022 BAM Trading disclosed customer fiat assets of $278,790,229 and customer crypto assets
of $1,778,308,784 as off-balance sheet. This treatment is reflected in Notes 1 and 5 of its 2022
audited financial statements.
As reflected in the Company’s 2022 audited financial statements, the Company is aware
that Staff Accounting Bulletin No. 121 (“SAB 121”) requires public companies that hold custodial
digital assets on behalf of customers to recognize a liability reflecting their obligation to safeguard
their customers’ assets and a corresponding safeguarding asset, both of which must be accounted
for at fair value. BAM Trading is not a public entity and is not required to adopt the approach
suggested by SAB 121. The Company is evaluating whether to adopt this approach going forward.
% * *
BAM Trading requests that this letter and all information contained therein (the
“Confidential Material”) be maintained in confidence by the SEC and its staff and be used solely
for the purposes of this inquiry. Accordingly, the Confidential Material has been marked
Confidential Treatment Requested by BAM Trading Services Inc. BAM-WH-CORR-044
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Case 1:23-cv-01599-ABJ-ZMF Document 140 Filed 10/03/23 Page 10 of 11
Jennifer Farer, Esq.
June 1, 2023
“Confidential Treatment Requested by BAM Trading Services Inc.” for reasons of personal
privacy and business confidentiality.
The Confidential Material concerns or may concern customarily non-public, confidential
and privileged business, financial, commercial, and personal information concerning BAM
Trading and/or its personnel. The Confidential Material is exempt from mandatory disclosure
under various provisions of the Freedom of Information Act (“FOIA”), including 5 U.S.C. §
552(b)(7) (which protects certain “records or information compiled for law enforcement
purposes”),4 5 U.S.C. § 552(b)(4) (which protects trade secrets as well as confidential commercial
or financial information obtained from a person), 5 U.S.C. § 552(b)(6) (which protects files “the
disclosure of which would constitute a clearly unwarranted invasion of personal privacy”), 5 and 5
U.S.C. § 552(b)(7) (which protects records or information compiled for law enforcement
purposes). Because the Confidential Material relates to the activities of BAM Trading and not the
activities of any federal agency, we believe it is exempt from disclosure under FOIA. 6 The
Commission treats records falling within the FOIA exemption categories to be “nonpublic” and
“will generally not publish or make available to any person” such records. 17 C.F.R. § 200.80(b).
Moreover, disclosure of this Confidential Material may be prohibited under 18 U.S.C. § 1905, and
further protections may be available under the Privacy Act of 1974, 5 U.S.C. § 552a. Finally, the
Confidential Material being produced voluntarily is protected from disclosure because it would
not customarily be released to the public by BAM Trading. 7
In accordance with 17 C.F.R. § 200.83 and other applicable laws and regulations, the
Confidential Material is submitted to the SEC with BAM Trading’s request, through the
undersigned, that it be kept in a non-public file and that only SEC staff have access to it. If any
person not a member of the SEC staff (including without limitation any governmental employee)
should request an opportunity to inspect or copy the Confidential Material, pursuant to FOIA or
otherwise, or if you or any member of the SEC staff contemplates disclosure of the Confidential
Material to any other person, we request that the undersigned immediately be notified of such
request, be furnished a copy of all written materials pertaining to such request (including but not
limited to the request itself), and be given advance notice of any intended release so that we may,
if deemed necessary or appropriate, pursue any remedies available. See, e.g., Chrysler Corp. v.
Brown, 441 U.S. 281 (1979). We expect to be given the opportunity to object to such disclosure.
We request that you telephone the undersigned rather than rely upon the U.S. mail for such notice.
4
See, e.g., NLRB v. Robbins Tire & Rubber Co., 437 U.S. 214 (1978).
5
See, e.g., U.S. Dep’t of Def. v. Federal Labor Relations Authority, 510 U.S. 487 (1994).
6
5 U.S.C. §§ 552(b)(6) and (b)(7)(C); U.S. Dep’t of Def., supra; see, e.g., U.S. Dep’t of Justice v. Reporters
Comm. for Freedom of Press, 489 U.S. 449 (1989).
7
See, e.g., Critical Mass Energy Project v. Nuclear Regulatory Comm’n, 975 F.2d 871 (D.C. Cir. 1992), cert.
denied, 507 U.S. 984 (1993).
Confidential Treatment Requested by BAM Trading Services Inc.
BAM-WH-CORR-045
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Case 1:23-cv-01599-ABJ-ZMF Document 140 Filed 10/03/23 Page 11 of 11
Jennifer Farer, Esq.
June 1, 2023
Should the SEC be inclined to grant any FOIA request for the Confidential Material, BAM
Trading expects that the procedures set forth in 17 C.F.R. § 200.83 and Executive Order 12,600,
52 Fed. Reg. 23,781 (June 23, 1987), will be followed. In that case, BAM Trading will further
substantiate its request for confidential treatment, and will request a hearing on the claim of
exemption.
The requests set forth in the preceding paragraphs also apply to any form of communication
of any sort, including, but not limited to any tapes, memoranda, notes, transcripts, electronic
documents, or communications containing extracts, summaries, or quotes, or other writings of any
sort whatsoever that are made by, or at the request of, any employee of the SEC (or any other
governmental agency) and which (1) incorporate, include or relate to any of the Confidential
Material; or (2) refer to any conference, meeting, or telephone conversation between BAM
Trading, its current or former employees, representatives, agents, auditors, or counsel on the one
hand and employees of the SEC (or any other government agency) on the other, relating to the
Confidential Material.
The Confidential Material remains the property of BAM Trading. If the SEC staff
determines to transfer any of the Confidential Material to another federal agency, we request that
you forward a copy of this letter to any such agency with the Confidential Material. We request
that you indicate to any such agency that BAM Trading has requested the return of this material to
the undersigned at the completion of the agency’s efforts in this matter and has requested that this
material be accorded confidential treatment.
Provision of the Confidential Material is not intended to, and does not, waive any
applicable privilege or other legal basis under which information may not be subject to production.
If it were found that production of the Confidential Material constitutes disclosure of otherwise
privileged matters, such disclosure would be inadvertent. By the productions of such documents,
BAM Trading does not intend to and has not waived the attorney-client privilege or any other
protections.
*
*
*
Please feel free to contact me if you have any questions about these matters.
Sincerely,
/s/ William R. McLucas
William R. McLucas
Confidential Treatment Requested by BAM Trading Services Inc.
BAM-WH-CORR-046
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