Home > Daily > 🥛SUED! Binance vs the SEC 🥊
June 6, 2023

🥛SUED! Binance vs the SEC 🥊


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Today’s edition is brought to you by the daily newsletter that makes you smarter about everything crypto – all in under 5 minutes. Calling for sponsors here.

GM, this is Milk Road. We’re like the local ice cream truck – we cool down the hot crypto market and always bring you something sweet.

It’s Tuesday, Roaders. It’s taco time.

  • The SEC just sued Binance/CZ 👊

  • 5 BIG wallets got exploited 🚨

  • 2 ways BTC mining is sustainable 🤝

  • $200M of liquidations in one hour 🍪

Prices as of 7:30 AM ET

THE SEC SUES BINANCE & CZ 👊

It was a calm Monday morning. I was on my 2nd cup of coffee. My dog was snoring on the couch without a care in the world.

And then, I got hit with a two-punch combo:

1/ My dog farted (aka The Silent Killer™)

2/ News broke that the SEC was suing Binance and its CEO (CZ)

What for? A bunch of stuff.

In fact, 136-pages worth of stuff…That’s right, the SEC dropped a mfing novel.

But don’t worry, the Milk Man read through every single page (ok, almost every page) – just so you wouldn’t have to.

Here are the allegations:

1/ Binance offered the sale of securities, without a license

2/ Binance knew they were selling securities, unlawfully

Just check out this absolute stunner of a comment from Binance’s CCO in late 2018, bro:

3/ Many popular tokens have been named “securities”

Not named a security: ETH.

Vitalik somewhere…

4/ BNB Vault & Simple Earn, which let users generate yield by staking crypto, are also investment schemes AKA they qualify as securities.

5/ Binance intermingled funds

The SEC says Binance/CZ took the billions it made via returns from its yield-earning programs and secretly mixed them in an account at a separate company that CZ controlled: Merit Peak Limited.

Then he transferred those assets to third parties.

CZ also personally received $62.5M from a Binance bank account between October 2022 and January 2023.

CZ really went and pulled an SBF…

6/ Binance.US inflated trading volume by using another company to wash trade

The company name? Sigma Chain. Which was also the name of my frat’s short-lived rap group

For example, Sigma Chain accounted for ~35% of all trading volume in the first 11 days that a token was listed ($COTI) on Binance.US.

At least $190M was transferred from 2 Binance entities to Sigma Chain in 2021. The company used $11M from the account that received those funds to buy a yacht.

So, what’s next? Well, the SEC wants:

  • Binance blocked from participating in crypto & acting as a broker/clearinghouse

  • Civil monetary penalties

  • Disgorgement of ill-gotten gains

TLDR – The SEC wants to fine the sh*t out of CZ.

How did the Binance team react? CZ tweeted his signature “4,” which means he’s claiming this is all bullsh*t.

Binance posted a blog post too in response saying the same thing.

How did everyone else react? It looked a little like this…

Plus, there has already been $900M+ in net outflows from Binance since the announcement. And BNB tanked by 8% on Monday.

It’s Dump O’clock, folks.

Not only is this the second gov’t agency to lob a lawsuit at the exchange, but it just all feels familiar. A little too familiar (cough FTX cough)

And if things couldn’t get crazier, the SEC also just sued Coinbase this morning for being an “unregistered exchange”. Let’s not forget they gave them a green light to IPO back in 2021.

The Milk Man’s gonna need a few more cups of coffee to get through it all, but we’ll keep Roaders updated with all important findings in tomorrow’s edition.

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– The Milk Man

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4/ Re-read #1-3

ATOMIC WALLET’S IN TROUBLE 🚨

Houston, we have a problem…another popular crypto wallet got hacked over the weekend.

Who? Atomic Wallet – a decentralized wallet that’s been around since 2017 (OG status).

It has 5M+ users.

Here’s everything you need to know about the hack:

  • $35M+ has been stolen thus far

  • Only 1% of daily monthly users were affected (according to Atomic Wallet)

  • Big wallets were targeted (i.e about $17M was taken from just 5 wallets)

Not to mention that Atomic Wallets Twitter bio has turned into a walking meme:

The worst part? No one knows how the hack happened, or if users are still at risk.

The Atomic Wallet team and some of the top internet detectives like ZachXBT are investigating the exploit, but no big news yet.

Sigh Another week, another crypto storage player goes down…

Trusted exchanges have gone bankrupt. Hardware wallets have lost trust. Platforms are getting hacked.

Looking for a good place to store your crypto looks a lot like this…

Stay safe out there, Roaders!

BITCOIN MINING 🤝 THE ENVIRONMENT

Look, we know mining crypto gets a bad rap.

It eats up a lot of energy to create each coin, etc.

But there are two words that will bring joy to environmentalists around the world: sustainable mining. Here are two ways its being done now

1/ El Salvador is mining with geothermal energy.

There are about ~30 volcanoes spitting out geothermal energy on the reg in El Salvador.

Well, the nation wants to use all that power to run its mining operations.

Cool, huh?

Plus, there’s a new $1B project that’s investing in solar & wind energy to create one of the world’s largest Bitcoin mining farms in El Salvador.

And back stateside..

2/ A North Dakota farm is using excess methane gas to mine BTC.

Check it out:

We all need a good reminder of what this space can do every once and a while.

MILK & COOKIES 🍪

The Milk Man has a new favorite podcast: The Money Movement. Listen to Circle Co-Founder and CEO Jeremy Allaire discuss the future of money and the latest industry trends with business leaders, economists, and government officials.*

More money was lost in rug pulls than exploits last month. One of the darker statistics to come out of May’s meme coin mania.

Mercado Bitcoin received a license to operate as a payment provider in Brazil. The license will enable them to offer digital banking services such as staking, fixed income and debit cards.

$200M of liquidations were caused in one hour by the Binance news. Impacting 110,000 traders and offering up a playground for others to get in on the fun.

Ethereum co-founder Jeff Wilcke moved $40M of ETH to Kraken yesterday. Causing lots of speculation online about his next move.

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.