COMPLAINT Rafey Balabanian

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a “go-to”locationforcybercriminals toconvertpurloinedcryptocurrency toother cryptocurrency lax policiesduringtheperiods relevanttothisaction,the Defendant, BinanceHoldings, Ltd.,was

E Lily Hough(SBN–315277) [email protected] Rafey Balabanian(SBN–315962) (415) 373-9435(fax) (415) 212-9300 San Francisco,California94107 123 TownsendStreet,Suite100 [email protected] . Plaintiff, v. BINANCE HOLDINGSLTD., EXCHANGE, INC., FISCO CRYPTOCURRENCY Attorneys forPlaintiff C Barton R.Keyes(prohacvicemotionpending) C. BenjaminCooper(prohacvicemotionpending) Rex H.Elliott(prohacvicemotionpending) Charles H. (614) 481-6001(fax) (614) 481-6000 Columbus, Ohio43221 2175 RiversideDrive DELSON DELSON OOPER OOPER Case 5:20-cv-06445Document1Filed09/14/20Pageof33 1. & PC

E Cooper, Jr.( LLIOTT This complaintarisesout ofthelaunderingstolencryptocurrency.Because ofits Defendant. ,

LLC pro hacvice NORTHERN DISTRICTOFCALIFORNIA UNITED STATESDISTRICTCOURT

INTRODUCTION motion pending)

COMPLAINT SAN JOSE

JURY TRIALDEMANDED COMPLAINT No.

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1 bitcoin, whichwasreleasedin2009. less”: anyonewithaninternetconnectioncantransmit funds. The firstcryptocurrencywas around theglobewithoutinterventionofintermediaries, it isoftenreferredtoas“permission- information betweenthemselvesatalltimes.Because cryptocurrency can beexchangedanywhere Instead, thesystem’susersrunsoftwarethatconnectsthemtootherparticipantssotheycanshare isn’t acentralbankorsubsetofusersthatcanchangetheruleswithoutreachingconsensus. isn’t ownedbyanyoneparty.Generallyspeaking,cryptocurrencyisdecentralizedinthatthere also betradedonexchanges. ownership. Likeotherassets,cryptocurrencycanbeusedtopurchasegoodsorservicesand transaction records,tocontrolthecreationofadditionalcoins,andverifytransfercoin in adistributedledger—acomputerizeddatabaseusingstrongcryptography—to secure designed toworkasamediumofexchangewhereinindividualcoinownershiprecordsarestored in adigitalsetting. Cryptocurrency Exchange,Inc.nowseekspaymentfromBinanceforthoselosses. laundered morethan$9millionofthestolencryptocurrencythroughBinance.PlaintiffFisco the world. exchange received27.5%oftheillicitbitcoin, morethananyothercryptocurrencyexchange in entities tocryptocurrencyexchangesin2019,itisestimatedthattheBinance or cash.Forexample,oftheapproximately$2.8billioninbitcointhatmovedfromcriminal then sharedwiththeperson whowantstosendcryptocurrency.Muchlike anemailaddress,a transactions between users. simply becausecryptocurrency makesextensiveuseofcryptographictechniques tosecure

Theterm“cryptocurrency” is aportmanteauof Case 5:20-cv-06445Document1Filed09/14/20Page2of33 6. 5. 4. 3. 2. A personcanreceivecryptocurrencybygenerating aunique“address,” whichis Cryptocurrency’s primaryfunctionistoserveasanelectroniccash systemthat Cryptocurrency typicallydoesnotexistinphysicalform.Itisadigitalasset Cryptocurrency After aJapanesecryptocurrencyexchangewashackedin2018,thethieves Cryptocurrency, Exchanges,andAnti-MoneyLaundering

1 isaformofdigitalcashthatenablesindividualstotransmitvalue COMPLAINT -

cryptography andcurrency . Thisis

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which, inturn,reducescryptocurrencythefts, exchangesimplement“knowyour exchanges tolaunderstolencryptocurrency.Tomakeitharder tolaunderstolencryptocurrency, transfers intoanexchangeandwithdrawalsfromexchange, but nottradesontheexchange. address givenbythecustomerthatisoutsideof exchange.Inthisway,thepubliccansee When acustomerdecidestomakewithdrawal, the exchangethensendscryptocurrencytoan public blockchain.Instead,theexchangeitselfmaintainsadatabaseofitscustomers’trades. transferred betweenthepoolingaddresses.Thus,tradesonanexchangedonotappear several “pooling”addresses,ratherthanindistinctaddressesforeachindividualcustomer. cryptocurrency withotherusersoftheexchange. to aspecificaddresscontrolledbytheexchange.Thecustomercanthentradehisorher use anexchange,acustomeropensaccount,thenmakesdepositbysendingcryptocurrency cryptocurrencies forotherassets,suchasdigitalcurrencies andtraditionalfiatmoney.To publicly availabledistributedledgercalledthe“blockchain.” permanently. Inthecaseofbitcoin,alltransactionsbetweenbitcoinaddressesarestoredona revealed. anonymous, inthattheidentityofauserbehindaddressremainsunknownunless it is address is1FmwHh6pgkf4meCMoqo8fHH3GNRF571f9w.Cryptocurrencyaddressesare addresses, andmanypeopleuseauniqueaddressforeachtransaction.Anexampleofbitcoin addresses. Unlikeanemailaddress,though,peoplehavemanydifferentcryptocurrency person cansendcryptocurrencytoanotherbysendingtheoneoftheir cryptocurrency exchange employstoconfirmtheidentityofitsuserorcustomer, all designed to customer” procedures.

Case 5:20-cv-06445Document1Filed09/14/20Page3of33 12. 11. 10. 9. 8. 7. “Know yourcustomer”(“KYC”) referstoasetofproceduresandprocesses a Because ofthepotentialanonymitytradeson an exchange, thieves lookto When acustomermakestradeonanexchange,cryptocurrencyisnotusually Typically, cryptocurrencyexchanges store theircustomers’cryptocurrencyin Cryptocurrency exchangesarebusinessesthatallowtheircustomerstotrade Transactions betweencryptocurrencyaddresses, however,arestoredpubliclyand COMPLAINT -

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hacked. Thecyber-thieves stoleapproximately$63millionworthofcryptocurrency, including bitcoin and“leadallexchangesin illicitBitcoinreceived byasignificantmargin.” report, Binanceandanotherexchange,Huobi,received morethan50%ofthe$2.8billioninillicit in 2019andthatBinancehadreceived27.5%of the illicitbitcoin.AccordingtoChainalysis it hadtraced$2.8billioninbitcointhatmovedfrom criminalentitiesto cryptocurrencyexchanges In astudythatexaminedcryptocurrencytheftsand launderingin2019,Chainalysisreportedthat companies, includingcryptocurrencycomplywithanti-money launderingstandards. laxest. Chainalysisisablockchainanalysiscompanythatinvestigatesfinancialcrimeandhelps procedures facilitatesmoneylaundering,andtheyknowwhichcryptocurrencyexchangesarethe information fromcustomersbeyondausername,password,andane-mailaddress.” release, thefinewasimposed,inpart,becauseexchangehad“failed toobtainrequired States whentheywillfullyviolateUS[anti-moneylaundering]laws.”Accordingtothepress located moneytransmitters,includingvirtualcurrencyexchangers,thatdobusinessintheUnited Financial CrimesEnforcementNetwork(“FinCEN”) warned“Wewillholdaccountableforeign- cryptocurrency exchange,theactingdirector of theUnitedStatesTreasuryDepartment’s For example,inaJuly26,2017,pressreleaseannouncing$110millionfineagainst failure toimplementproperKYCproceduresfacilitatesviolationsofanti-money launderinglaws. stolen cryptocurrencybecomesmuchharder. identified, andiftheindividualsinvolvedinatransactioncanalsobelaundering address, anemailorautilitybill,tonamefew. means ofidentification—includinggovernment-issuedidentitycards,phonenumbers,aphysical and jurisdictions,KYCfundamentallyinvolvesthecollectionverificationofacustomer’s help thwartmoneylaundering.WhiletherobustnessofKYCproceduresvariesacrosscompanies

Case 5:20-cv-06445Document1Filed09/14/20Page4of33 16. 15. 14. 13. On September14,2018, aJapanesecryptocurrencyexchangecalled Zaifwas Cryptocurrency thievesalsoknowthatthefailuretoimplementproperKYC Cryptocurrency exchanges,includingBinance,havelong beenonnoticethatthe In otherwords,transactionsinvolvingstolencryptocurrencycanbe publicly The ZaifHackandBinance’s Failures COMPLAINT -

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the stolenbitcointoasingleaddress:1FmwHh6pgkf4meCMoqo8fHH3GNRF571f9w. thieves tostealcryptocurrency, andlaunderitbybreaking thecryptocurrency intoamountsof2 therefore easilyopenedanonymously, includingbyusersintheUnitedStates withinCalifornia. identification documents,giventhatBinancedid notrequireanidentity atall.Accountswere Binance didnotrequiretheseuserstovalidatetheir identityinformationbyprovidingofficial required wasapasswordandanemailaddress.Unlike legitimatevirtualcurrencyexchanges, identifying information,suchasname,dateofbirth, address,orotheridentifiers.AllBinance withdraw upto2bitcoinsperday,theuserdidnot needtoprovideeventhemostbasic stolen bitcoin,apersoncreatedanaccountbyaccessingtheBinancewebsite.Totradeor though theBinance.comexchangewithoutanyformofidentificationverification.Tolaunder facilitated moneylaunderingbyallowingdepositsandwithdrawalsofupto2bitcoinsperday throughout theindustry. hack throughBinancebecausefailedtoimplementsecuritymeasuresthatwerestandard measure uptoindustrystandards.ThethieveswereablelaunderthebitcoinsstoleninZaif “know yourcustomer”andanti-moneylaunderingprotocolsareshockinglylax do not through Binance:despitebeingoneoftheworld’slargestcryptocurrencyexchanges,Binance’s was valuedatapproximately$9.4millionthetimeitlaunderedthroughBinance. 1NDyJtNTjmwk5xPNhjgAMu4HDHigtobu1s, whichbelongedtoBinance.Thelaunderedbitcoin eventually laundered1,451.7bitcointhroughBinance. A significantportionwassenttoaddress bitcoin, acryptocurrencycalledbitcoincash,andMonacoin. $22 millionofthestolencryptocurrencywasfromZaif’sownassets.Thehackersstoleamix $41 millionofthestolencryptocurrencyhadbeendepositedbycustomers,andapproximately from customerswithintheUnitedStatesandCalifornia.Ofthisamount,approximately

Case 5:20-cv-06445Document1Filed09/14/20Page5of33 18. 21. 20. 19. 17. Blockchain analyticsconfirmsthat,fromthataddress,thethieveswhohackedZaif Binance’s practiceenabled, andstillenables,skillfulcryptocurrencyhackers and During thetimesrelevanttothisaction,andcontinuingdate,Binancehas There isasimplereasonwhythethieveslaundereddigitalloottheystole Soon afterthehack,analyticsofpublicly availablebitcoinblockchain traced COMPLAINT -

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have doneso. either intentionallyornegligently failedtointerruptthemoneylaundering processwhenitcould some orallofthestolen cryptocurrency left the Binanceexchange,butitdidnotdoso. cryptocurrency andreturnthefundstoZaifexchange. Binancecouldhavedonesobefore had theabilitytofreezethoseaccounts andstoptransactions onitsexchangeinvolvingthestolen Zaif exchangehadbeentransferredtoaddresses and accountsonBinance’sexchange.Binance likely attempttolaundersomeorallofthestolen cryptocurrencythroughBinance. exchange, assoonahackofanexchangeisreportedBinanceonnoticethatthethieveswill Binance exchange. cryptocurrency hadbeentransferredtoaddressescontrolledbyBinance,andthereforewasonthe public statementsontheinternet,includingthrough Twitter,thatsomeofthestolen successfully launderthestolenloot. bitcoin. Binancefailedtotakeactioninresponsethisinformation,andthethieveswereable the incident.ZaifrequestedthatBinancefreeze transactions andaccountsinvolvingthestolen criminal funds. from theBinanceplatform.Inshort,served asbothareceptacleandtransmitterof way, thethievesconvertedstolenbitcoinintoothercryptocurrenciesandtransmittedvalue thousands ofseparatetransactionsandaccounts,allvaluedbelowthe2-bitcoin threshold.Inthis meaningful identificationorKYCinformation.Thethievesbrokethestolenbitcoin into open accountsandtransactontheexchangeinamountsbelow2bitcoinswithoutprovidingany stolen fundsthroughBinancebytakingadvantageofBinance’spolicythatallowednewusersto identification. bitcoins orless,depositingit,convertingtheillegalloot,andwithdrawingallwithoutproviding

Case 5:20-cv-06445Document1Filed09/14/20Page6of33 26. 25. 24. 23. 22. Accordingly, Binancehadactualknowledgethat cryptocurrencystolenfromthe Moreover, becauseBinancereceivesmorestolencryptocurrencythananyother Also, withindaysaftertheZaifhackwasreported,variousanalyticsentitiesmade In addition,shortlyafterthehack,ZaifcontactedBinancestafftoalert That ispreciselywhatoccurredinthe2018Zaifhack:thieveslaundered COMPLAINT -

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suffered byZaif,TechBureau Corp.,andthecustomersofZaif. include Californiaresidentsgenerallyand of thisjudicialdistrictinparticular. transfer andwhosecryptocurrencyhadbeenstolen inthehack.ThecustomersFiscoreimbursed Upon assumingcontrolofZaif,Fiscoreimbursed theZaifcustomerswhoagreedtobusiness Bureau Corp.,whoenteredintoabusinesstransfer agreement with Fiscotoavoidbankruptcy. cryptocurrency exchange.Shortlyafterthehack, FiscopurchasedtheZaif exchange fromTech enabled theharmtooccur,Binance. hack, PlaintiffpurchasedtheZaifbusiness,includingallclaimshasagainstentitythat suffered financialharmwhenitsbitcoinwasstolenandlaunderedthroughBinance. After the to pursuethosecustomers’claimsagainsttheentitythatenabledharmoccur,Binance. customers, whowerethenreimbursedbyPlaintiff.Asaresult,Plaintiffhastherightandauthority was stolenandlaunderedthroughBinance.TheindividualswhosufferedtheselosseswereZaif residents, includingresidentsofthisjudicialdistrict, suffered financialharmwhentheirbitcoin transactions onitsexchangeaspossible,includinginvolvingstolencryptocurrency. other words,Binancehasastrongmonetaryincentivetoencourage,facilitate,andallowasmany enhance andmaintaintheliquiditythatisessentialtoanefficientprofitableexchange.In other cryptocurrencyorfiat,andinpartfromthefrequencyvolumeoftradingthathelps transactions ontheBinanceexchange, includingtradesinwhichstolenbitcoinisexchangedfor threshold. cryptocurrency industrypublicationreportedthatBinancehadcrossedthe$1billionprofit

Case 5:20-cv-06445Document1Filed09/14/20Page7of33 32. 31. 30. 29. 28. 27. Plaintiff istherealparty ininterestfortheharmsrelatedtohackofZaif Plaintiff, FiscoCryptocurrencyExchange,Inc.(“Fisco”),isaJapanese As adirectandproximateresultofBinance’spoliciesfailures,Zaifitselfalso As adirectandproximateresultofBinance’spoliciesfailures, California Binance’s profitsarederivedinpartfromthefeesBinancereceivesfor Since itsfounding,Binancehasgrownatanenormousrate.InOctober2019,a THE PARTIES COMPLAINT -

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marketplace wheretheycouldeasilylaundertheir stolendigitalloot. money laundering(“AML”)andKYCproceduresencouragedhackersbyproviding thema and arebeingassertedby,Plaintiff,sufferedharm becauseBinance’sunreasonablylax anti- Motor Co.,374F.3d797,800-801(9thCir.2004). requirements, andthusthejurisdictionalanalysisissame. Schwarzeneggerv.FredMartin on anybasisnotinconsistentwiththeConstitutionofthisstateorUnitedStates.”). (2014); seealsoCal.CodeCiv.Proc.§410.10(“[A]courtofthisstatemayexercisejurisdiction extent permissibleundertheU.S.Constitution.SeeDaimlerAGv.Bauman,571117,125 Collectively, theseconstitute“Binance.” of ServicedefineBinanceasfollows: refers toitselfasan“ecosystem”comprisingseveralinterrelatedcomponents.Defendant’s Terms founded byChangpengZhou,whoisknownas“CZ,”inChinathesummerof2017.Defendant

Case 5:20-cv-06445Document1Filed09/14/20Page8of33 39. 38. 37. 36. 35. 34. and fiatgateways).” Binance Labs.Charity,DEX,X,JEX,TrustWallet, clients withintheecosystem(e.g.,Binance’sOpenPlatform,BinanceLaunchpad, Binance Services,andincludesindependently-operated platforms,websitesand applications, clients,appletsandotherapplicationsthataredevelopedtooffer names includebutarenotlimitedto https://www.binance.com), mobile “Binance referstoanecosystemcomprisingwebsites(whosedomain 33. Plaintiff’s claimsalsoinvolve harmsufferedinCalifornia. The ZaifcustomerswhowereresidentsofCalifornia, whoseclaimsnowbelongto, Plaintiff’s claimsinvolveharmtoCaliforniaresidents. This suitarisesoutoforrelatestoBinance’scontactswiththeforum. California’s jurisdictionalstatuteiscoextensivewithfederaldueprocess California’s long-armstatuteallowstheexerciseofpersonaljurisdictiontofull Defendant, BinanceHoldings,Ltd.,isacryptocurrencyexchange.Itwasco- Specific Jurisdiction JURISDICTION COMPLAINT -

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California. and systematic,soconstant andpervasive,astorenderBinanceessentially athomein essentially athomehere. the corporation’saffiliationswithCaliforniaare so “continuous andsystematic”astorenderit incorporated inCalifornia,ifthecorporationhas itsprincipalplaceofbusiness inCalifornia,orif with fairplayandsubstantialjustice. steps tofreezeaccountsinBinance’sCaliforniaservers. obtained inamannerconstitutingtheft,arisesoutoforrelatestoBinance’sfailuretakeproper selling orwithholdingstolenpropertyfromtheowners,knowingwas Binance violatedCaliforniaPenalCodeSection496byaidingtheZaifhackersinconcealingor stolen cryptocurrencywhenitwastransferredtotheBinanceexchange,andPlaintiff’sclaimthat example, Plaintiff’sconversionclaimarisesoutoforrelatestoBinancetakingpossession ofthe California. cryptocurrency reserves,withoutwhichBinancecouldnotconductitsbusinessoperations,arein and belief,Binance’stechnologyplatform,the“coldstorage”hardwarethatstores hack BinancemoveditsoperationstoserversinCalifornia. As discussedbelow,uponinformation itself oftheprivilegesconductingactivitiesinCalifornia. Asdiscussedbelow,beforetheZaif and launderedthroughBinance’sserversinCalifornia. are beingassertedby,Plaintiff,sufferedharminCaliforniawhentheircryptocurrencywasstolen

Case 5:20-cv-06445Document1Filed09/14/20Page9of33 46. 45. 44. 43. 42. 41. 40. In addition,Binance’saffiliationswiththeState of Californiaaresocontinuous In lightofthefactsbelow,Binance’sprincipalplace ofbusinessisinCalifornia. This Courtmayassertgeneraljurisdictionover The exerciseofjurisdictionoverBinanceinthisforum isreasonableandcomports Plaintiff’s claimsariseoutoforrelatetoBinance’sforum-related activities.For Binance purposelydirecteditsactivitiestowardCaliforniaandavailed Zaif andallcustomersaffectedbythehack,whoseclaimsnowbelongto, General Jurisdiction COMPLAINT -

a corporationiftheis

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world, andeachAWSRegionconsistsofmultiple “AvailabilityZones”thatcontainoneormore hosted inmultiplelocationsworld-wide.AWSoperates in24geographic“Regions”aroundthe Amazon WebServices(“AWS”)tooperateitsbusiness. cryptocurrency thatisstoredandtradedthroughtheBinanceexchange. the dataBinanceusestooperateitsexchangeandcomputerserversusedfor for thecryptocurrencythatisstoredandtradedthroughBinanceexchange. house andtransmitthedataBinanceusestooperateitsexchangecomputerserversused are located,inwholeorpart,California. convert Binance’scryptocurrencyholdingsintofiatcash.Uponinformationandbelief,allthree hardware thatstoresBinance’scryptocurrencyreserves;and(3)thethird-party vendorsthat its business:(1)theserversthathostBinance’stechnologyplatform; (2)the“coldstorage” “nerve center”ofBinance can beviewedasthephysicallocationofthreecriticalcomponents Binance’s businessconsistsofoperatingacryptocurrencyexchange,thephysicallocationor to betheBinanceoffice.WhereverIneedsomebody,isgoingoffice.” an interviewwhereBinance’sheadquarterswaslocated.Heresponded “Wherever Isit,isgoing principal office.Forexample,inMay2020,Binance’s founder andCEO,CZ,wasaskedduring claims wereunrelatedtoactivityoccurringinCalifornia. California. data centers.FourAWS Regions existintheUnitedStates,oneofwhich isinNorthern

Case 5:20-cv-06445Document1Filed09/14/20Page10of33 53. 52. 51. 50. 49. 48. 47. AWS isheadquarteredintheUnitedStates,and its cloudcomputingresourcesare Since 2017,Binancehasusedcomputerserversand datacentersprovided by Binance is“athome”wherecomputerserversarelocatedthathouseandtransmit Binance’s principalplaceofbusinessiswherecomputerserversarelocatedthat Because Binancehasnobrick-and-mortarcorporateheadquarters,andbecause Binance hasrepeatedlystatedthatitnotraditional“headquarters”orphysical As aresult,generaljurisdictionoverBinanceexistsinCalifornia even ifPlaintiff’s Physical LocationoftheServersHostingBinance COMPLAINT -

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exchange FTXselectedCoinbasetocustodythe cryptocurrency usedinitsbusiness. Francisco BayArea,tocustodythecryptocurrency usedinSwipe’sbusiness. Binance admitsthatSwipeusesCoinbaseandBitgo,bothofwhicharelocatedintheSan controlled andmanagedbybusinessesheadquarteredintheSanFranciscoBayArea. reserves arestoredinofflinehardwarefacilities located intheSanFranciscoBayAreaand California. three largestofthesesix(Bitgo,Coinbase,andXapoInc.)havetheirheadquartersinNorthern reserves inofflinephysicalhardwarelocations(known as“coldstorage”). Clara County. of Binance’sdigitaldatausedtorunitstechnicalplatformisstoredonserverslocatedinSanta California arelocatedinSantaClaraCounty. Therefore,uponinformationandbelief, mostorall data usedtorunitstechnicalplatform are locatedinCalifornia. information andbelief,theAWSRegionAvailabilityZoneshousing Binance’sdigital servers BinancereliesonforitsoperationsarelocatedintheStateofCalifornia. Upon use foritsoperations.Uponinformationandbelief,asignificantportionifnotalloftheAWS Francisco andelsewhere inCalifornia.Forexample:

Case 5:20-cv-06445Document1Filed09/14/20Page11of33 61. 60. 59. 58. 57. 56. 55. 54. Physical LocationoftheHardwareStoringBinance’sCryptocurrencyReserves Binance hasemployed,andcontinuestoemploy, numerous executives inSan In anotherexample,onMay24,2020,theBinance-backed cryptocurrency For example,onJuly7,2020,BinanceacquiredcryptocurrencystartupSwipe. Upon informationandbelief,asubstantialportionofBinance’scryptocurrency The sixlargestandmost-trustedcoldstorageprovidersareallU.S.firms. Binance storesmostoftheprivatekeysneededtoaccess itscryptocurrency Upon informationandbelief,thelargemajorityofAWSdatacenter Regions in Binance hastheabilitytoselectwhichAWS Regionsanddatacentersitwishesto Binance’s Employees COMPLAINT -

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https://cryptocurrencyjobs.co/marketing/binance-social-media-manager/ (last visitedSept.5, Location: SanFrancisco,CA.Employeescanalso workfulltimefromthisoffice.” https://workaline.com/listing/f153254a (lastviewed Sept.5,2020).Thepostingstates“Office in SanFrancisco,Ca.” Sept. 5,2020).Thepostingstates“Thisposition is remote,butthemajorityofteamoperates https://angel.co/company/binance-3/jobs/433682-android-developer-trust-wallet (lastviewed San Franciscofor: (not Binance.US,whichhasseparatelistings)eitherpresentlyorrecentlyhadjobopeningsin https://www.linkedin.com/in/clark-guo-4b395911/ (lastvisitedSept.5,2020). https://www.linkedin.com/in/nicholas-santomauro-a7039440/ (lastvisitedSept.5,2020). 2020). – isinSacramento,California.Seehttps://www.linkedin.com/in/jarredwinn/(lastvisitedSept.5, https://www.linkedin.com/in/sunflora/ (lastvisitedSept.5,2020). foster innovationontheBinanceplatform – isinPaloAlto,California.See https://www.linkedin.com/in/leahli/ (lastvisitedSept.5,2020). https://www.linkedin.com/in/mattshroder/ (lastvisitedSept.5,2020). who claimstoreportdirectlyBinance’sfounder,isinSanFrancisco.See 2020). Thepostingstated “Binanceishiringafull-timeSocialMediaManager inSanFrancisco.”

Case 5:20-cv-06445Document1Filed09/14/20Page12of33 62. c. b. a. In addition,accordingtovariouswebsitesforjobseekers,Binance f. e. d. c. b. a. “Social MediaManager.” See “Mobile UI/UXDesigner–TrustWallet.”See “Android Developer–TrustWallet.”See A BinanceriskmanagementemployeeisemployedinSanFrancisco. A SeniorManagerofUserAcquisitionatBinanceisinSanFrancisco. The SeniorVicePresidentofBinance|Charity – anotherBinanceinitiative The managingdirectorofBinanceX – aninitiativeBinancecreatedto Binance’s CommunicationsDirectorisinSanFrancisco. According toLinkedIn,Binance’sVicePresidentofGlobalOperations, COMPLAINT -

See See See

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Use alsoexplainthatthefiatgatewaysarepartof theservices defines “Binance.”Afterexpresslydefining“Binance”toinclude“fiatgateways”the Termsof that itconsidersitsfiatgateways,includingBinance.US,tobepartofthe“ecosystem” located withinthisjudicialdistrict,to enable whatBinancecallsits“ecosystem”tofunction. 2020). https://web.archive.org/web/20200410065337/https://jobs.lever.co/binance (lastvisitedSept.5, website listedanopeningfora“SeniorRecruiter”inCalifornia.See 2020). https://web.archive.org/web/20200227120611/https://jobs.lever.co/binance (lastvisitedSept.5, Director,” and“SecurityEngineer,”allofwhichwereidentified asbeinginCalifornia.See Binance’s websitelistedopeningsfor“BlockchainEngineer,”“AndroidDeveloper,”“Product visited Sept.5,2020). California. Seehttps://web.archive.org/web/20190802051727/https://jobs.lever.co/binance (last “Marketing/User OperationsSpecialist/Manager,”allofwhichwereidentifiedasbeingin website listedseparatejobopeningsfor“BlockchainEngineer,”“Androidand

Case 5:20-cv-06445Document1Filed09/14/20Page13of33 novel servicestobeprovided byBinance. Binance X,Fiat Gateway,existingservicesofferedbyTrustWallet and Charity, BinanceInfo, Launchpad,BinanceResearch,Chain, Platforms, thefinancing sector, BinanceLabs,Academy, not limitedtosuchBinanceecosystemcomponents asDigitalAssetTrading enabled byfuturetechnologicaldevelopment).Binance Servicesincludebutare websites, mobileapplications,clientsandotherforms (includingnewones based onInternetand/orblockchaintechnologies andofferedviaBinance Binance Servicesrefertovariousservicesprovidedyouby thatare 64. 63. Binance makesclearinthe“BinanceTermsofUse”thatitsusersmustagreeto In addition,Binanceusesvariousthird-partycompanies,includingcompanies f. e. d. Binance’s EcosystemofNecessaryThird-PartyVendors According toarchivedpagesofBinance’swebsite,inApril2020 According toarchivedpagesofBinance’swebsite,inFebruary2020 According toarchivedpagesofBinance’swebsite,in2019Binance’s COMPLAINT -

Binance provides:

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agree toTermsofUsethat subjectthemtoCalifornialaw. business isinSanFrancisco. ToutilizeTrustToken,Binance’strusted“fiat partner,”usersmust bank account.”Seehttps://www.binance.com/en/buy-sell Binance describesas“Themoststraightforward way tomovemoneybetweencryptoandyour between fiatandcrypto.” Binance CFOWeiZhouexplainedthat needed “more andeasierwaystoconvert cryptocurrency tofiatandviceversa.Inaninterview conductedbyBlockchainAssetReview, which provideasfollows: because itenablesBinance’suserstomanagetheircryptocurrency. of theever-growingBinanceecosystem.”TrustWalletisanessentialpartBinance’soperations the serversthroughwhichithelpsfacilitateBinance’soperationsarelocatedinSanFrancisco. Trust Wallet,whichisavitalcomponentofBinance’soperations,locatedinSanFrancisco, and mobile walletofBinance”andprovidesalinkwhereBinanceuserscandownloadtheapplication. DApps Platform,Inc.d/b/aTrustWallet.Binance’swebsitestates“TrustWalletistheofficial funds andmanagetheirprivatekeys.InJuly2018,BinanceacquiredaSanFranciscocompany, Binance. of whichisSanFrancisco-basedBAMd/b/aBinance.US—isaserviceprovidedby In short,Binance’sTermsofUseinformconsumersthata“BinanceFiatGateway”—one

Case 5:20-cv-06445Document1Filed09/14/20Page14of33 69. 68. conveniens inanysuchaction. on lackofpersonaljurisdiction,placeresidence,impropervenue,orforumnon use oftheServicesoryourbreachtheseTerms.Youwaiveanyobjectionbased California forexclusivejurisdictionofanydisputearisingoutorrelatedtoyour The partiesagreetosubmitthefederalorstatecourtsinSantaClaraCounty, 67. 66. 65. The Binancewebsitestatesthata“BinanceFiatPartner” is“TrustToken,”which Binance’s operationsrelyonusersmovingcryptocurrencyandconverting To useTrustWallet,BinanceusersmustagreetoWallet’s “TermsofUse,” According toBinance’swebsite,TrustWalletis“animportantinfrastructurepart Binance requiresitsuserstohaveasecureanddecentralized“wallet”store COMPLAINT -

-crypto. TrustToken’sprincipal placeof See https://www.trusttoken.com/terms-

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period 2013-2020SanFranciscohadthegreatest numberofcryptocurrencyusersintheUnited users totracktheirdigitalcurrenciesandgenerate cryptocurrencytaxreturns,foundthatforthe largest quantumofBinance’susersandactivities. on thisdata,anduponinformationbelief, apercentagebasisCaliforniansrepresentedthe Francisco hadthegreatestnumberofcryptocurrencyusersinUnitedStates.Therefore, based combined. And,basedonarecentstudyconductedbyCoinTracker,duringtherelevanttimeSan exceeded thepercentages of usersfromthesecond,third,fourth,fifthandsixth-mostcountries Indeed, attimesrelevanttothisaction,thepercentageofU.S.usersBinance’sexchange U.S. usersofBinance’sexchangefarexceededthepercentagefromanyothernation. played adominantroleingeneratingmoneyforBinance activitiesinasmuchasthepercentageof demonstrates that,duringthetimesrelevanttothisaction, U.S.usersoftheBinanceexchange Francisco. Trading’s soleinvestor.KoiTradingandBinance.UShavethesameofficeaddressinSan called CERE;andinvested$3millioninSanFrancisco-based KoiTrading.BinanceLabsis Francisco startup,MarlinProtocol;invested$3.5millioninaSanFranciscostartupcompany example, throughBinanceLabs,Binance:participatedina$3millioninvestmentSan of dollarsincompaniestheUnitedStates,includingbasedCalifornia.For and cryptocurrencyentrepreneurs.Todate,throughBinanceLabs, Binancehasinvestedmillions California’s laws. based companieslikeTrustWalletandTrustToken that requirecustomerstosubmit of-use. cryptocurrency exchange intheworld,amajorityofU.S.cryptocurrency usersinSanFrancisco States. Uponinformation andbelief,becauseBinanceispurportedly thelargest

Case 5:20-cv-06445Document1Filed09/14/20Page15of33 73. 72. 71. 70. A recentstudyconductedbyCoinTracker,acompany thatenablescryptocurrency Moreover, anappraisalofBinance’saffiliationsandactivitiesintheirentirety Binance createdanaffiliate,Labs,toinvestinandincubateblockchain In otherwords,toconductitsoperations,BinancehaschosenrelyonCalifornia- COMPLAINT -

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had littletodowiththerelocationofaphysicaloffice. Rather,Binance“moved”outofChinain and maintainingdigitaldataoveradistributedcloud-based network,Binance’smovefromChina exchanges, includingtheBinanceexchange, “moved.” Shanghai. WhenitappearedthatChineseauthorities wereabouttoregulatecryptocurrency why. Binance.US istreatedasseparateandwhollydistinctfromBinance. should beregardedandtreatedasasingleenterprise,therewouldaninequitableresultif that theseparatepersonalitiesoftwoentitiesdonotinrealityexist.Binanceand Binance.US contacts withtheStateofCaliforniashouldbeimputedtoBinance. dominated andcontrolledbyBinanceastobeBinance’salterego.Asaresult, Binance.US’s to renderBinanceathomeinCalifornia. Binance’s operationsinandaffiliationswithCaliforniaaresosubstantialofsuchanatureas Trademark Office. Binance registeredninedifferentU.S.trademarksthroughtheUnitedStatesPatentand in California,includingwithinthisjudicialdistrict. are Binanceuserswhosetransactionsoccurthroughcomputernetworksandinfrastructurelocated computer serverslocated outsideofChina. August 2017bymoving itscloudoperationsfromcomputerserverslocated inChinatodifferent

Case 5:20-cv-06445Document1Filed09/14/20Page16of33 80. 79. 78. 77. 76. 75. 74. Because Binance’sbusinessoperationsconsistprimarily ofhousing,monitoring, When itwasfoundedin2017,Binancereportedlymaintainedanoffice The followinghistoryofBinance,leadingtothecreationBinance.US,explains There issuchaunityofinterestandownershipbetweenBinanceBinance.US BAM TradingServicesInc.d/b/aBinance.US(“Binance.US”)issothoroughly Even ifCaliforniaisnotdeemedtobeBinance’sprincipalplaceofbusiness, Utilizing aCaliforniaattorney,fromandoverthecourseoftwoyears, Binance MovestoAvoidRegulationinChinaandJapan COMPLAINT Alter Ego -

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came fromcustomersintheUnitedStates,more than fromanyothernation. users bytheendof2019.InJune2018,Forbesmagazine reportedthat38%ofBinance’straffic It hadmorethan5,000,000usersinJanuary2018, 10,000,000usersbyJuly2018,and15,000,000 constitute aparadigmatic“headquarters”or“principalplace ofbusiness.” internet-operated companiesBinancedoesnothaveabrick-and-mortar locationthatwould According toindustryreports,anduponinformationbelief,likeanincreasingnumberof cryptocurrency sphereandisthereforenotsubjecttoregulatoryoversightbytheMFSA.” issued astatementthatBinancewas“notauthorizedbytheMFSAtooperatein Binance asa“Malta-basedcryptocurrencycompany,”theMalta Financial ServicesAuthority never claimedtobedomiciledthere,andinFebruary2020,followingareportthatreferred reportedly toMalta.ButMaltaneverbecameBinance’sprincipalplaceofbusiness.Binance trade volumeonasingleexchange. criminal chargesforoperatingwithoutalicense.Bythattime,Binanceclaimedtohavethelargest exchange toshutdownitsoperations.ItwasreportedthatBinancehadbeenthreatenedwith Japan. InMarch2018,Japan’sFinancialServicesAuthorityissuedawarningandaskedthe Region andAWSAvailabilityZoneshousingBinance’sdigitaldataarelocatedinCalifornia. over toAmazonWebServices intheUnitedStates.Uponinformationandbelief,AWS would effectivelycontroltheflowofBinance’sdigitaldata,Binancemoveditscloudoperations Chinese conglomerateAlibaba.Topreventauthorities fromimposingafirewallthat Binance.com’s websitetraffic fortheprecedingsixmonths: Block, whichresearches andanalyzesdigitalassets,includedthefollowing chartreflecting

Case 5:20-cv-06445Document1Filed09/14/20Page17of33 86. 85. 84. 83. 82. 81. Binance’s growthcontinued in2019.AnarticlepublishedJune2019by The By early2018,Binancehadbecometheworld’s biggest cryptocurrencyexchange. Binance hasrepeatedlydisavowedhavinganyprincipalplace ofbusiness. As aresultoftheregulatorypressurefromJapan,Binance“moved” again, In oraroundAugustSeptember2017,Binancebeganworkingfromofficesin At thetime,Binancehadmorethan200cloud-based servers,hostedbythe Binance’s DesiretoAvoidRegulationintheUnited States COMPLAINT -

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currency, includingintheformof[initialcoinoffering] coinsortokens,inexchangeforanother stated, “Underexistingregulationsandinterpretations, adeveloperthatsellsconvertiblevirtual and theissuanceofnewcryptocurrency“coins” (what FinCENcalls“virtualcurrency”). FinCEN issuedastatementabouttheapplication ofAMLrequirementstoentitieslikeBinance money transmitters. MSB isa“moneytransmitter.”TheUnitedStatesconsiderscryptocurrencyexchangestobe money launderingobligationsitimposeson“moneyservicesbusinesses”(“MSBs”).Onetypeof United StatesTreasuryDepartmentthatadministersthe BankSecrecyAct(“BSA”)andtheanti- scrutiny byU.S.authorities ofcryptocurrencytransactionsthatimpacted U.S.customers. AML/CFT requirements thatapplytothistypeofMSB.”Thissignaledadditional regulatory type ofvaluethatsubstitutes forcurrencyisamoneytransmitter andmustcomply with be-blocked-from-trading-on-binance-com (lastvisitedAug.18,2020). The informationcanbefoundathttps://www.theblockcrypto.com/post/27252/us-customers-to-

Case 5:20-cv-06445Document1Filed09/14/20Page18of33 88. 87. In February2018,andinresponsetoaninquiryby aUnitedStatesSenator, The FinancialCrimesEnforcementNetwork(“FinCEN”)isabureauwithinthe COMPLAINT -

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among otherthings,the following: are intertwinedtosucha degreethat Binance.US isanalteregoofBinance. This isevidencedby, you canreallyaddvalue.” tapped meontheshoulderandsaid,whatareyour thoughtsaroundcomingtoBinance,andwhere advance Binance’soperationsinthe United States.According toColey,Binance’sCFO“kindof Coley. Inaninterview,Coleyexplainedthatshe was recruitedbyBinance’sCFO,WeiZhou,to Plaintiff. it, whyitwascreated,orhowcapitalizedatstartup.Thisinformationisunavailableto does businessinCaliforniaandbeyondas“Binance.US.” Binance.UShasnotrevealedwhoowns 2019, anditsheadquartersarelocatedinthisjudicial district, inSanFrancisco,California.BAM risk ofexposingBinanceHoldings,Ltd.toregulationbyU.S.authorities. formed toenableBinanceretainitsU.S.userbasewhile simultaneouslytryingtominimizethe owner, CZ,createdBAMTradingServices,Inc.d/b/aBinance.US.Binance.USwasspecifically create oneinstead.Asaresult,Binance,orthoseactingupontheinstructionsofBinanceits regulations. RatherthanselectanexistingU.S.companytopartnerwith,Binance decided to to Binance’sexchangeandwouldexposethatU.S.company,ratherthanBinance, to cryptocurrencyandsubjectonlythe“onramp”entityU.S.AMLrequirements. Binance’s cryptocurrencyexchangethatwouldenableU.S.userstoconvertfiat—U.S. dollars— give upitslucrativeU.S.customerbase,Binancedevisedaplantocreate“onramp” Binance’s entireoperationtoregulatoryscrutinybyU.S.governmentalagencies,yetunwilling operations havingtostrictlycomplywithU.S.AMLrequirements.Unwillingsubject

Case 5:20-cv-06445Document1Filed09/14/20Page19of33 93. 92. 91. 90. 89. Although Binance.USisaseparatelyincorporated entity,Binanceand Binance.US Binance selectedandinstalled Binance.US’s chiefexecutiveofficer,Catherine BAM TradingServices,Inc.wasincorporatedintheStateofDelawareFebruary Binance’s planwastohaveaU.S.businessthatwouldserveas“onramp” Because ofitslargeU.S.customerbase,Binancewasconcernedaboutglobal Binance Creates“Binance.US” COMPLAINT -

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Case 5:20-cv-06445Document1Filed09/14/20Page20of33 • • • • • • • • Binance makesclearinthe“BinanceTermsofUse” thatitsusersmustagreeto Digital assetmarketplaceslike Binance.US requireliquidityto,amongother Based onpubliclyavailableinformationaboutthecreationof Binance.US andits Binance recentlyreiteratedthatitiscontrollingthesystemsareessentialforits Binance providesthesecuritypracticesandbrandingforBinance.US. Binance providesthetechnologyforBinance.USonramp. According tostatementsmadeinApril2020byColey,twoof Binance.US’s three services Binanceprovides: “fiat gateways”theTermsofUsealsoexplainthat thefiatgatewaysarepartof “ecosystem” thatdefines“Binance.”Afterexpressly defining “Binance”toinclude that itconsidersitsfiatgateways,includingBinance.US, tobepartofthe judicial district. Francisco operationandpromotingcommercewithin Californiaandwithinthis Maker fortheBinance.USPlatform,therebyfacilitating liquidityfortheSan Binance orthoseactingforatBinance’sdirection haveservedasaMarket information andbelief,atBinance.US’sinception,likelycontinuingtodate, Market MakersmayenterintoTransactionswithyouasyourcounterparty.”Upon appointed byBAMtopromoteliquidityonthePlatform,andanysuch include affiliatesorrelatedcorporationsofBAMactinginsuchcapacity)maybe website’s “TermsofUse”explainthat“oneormoreMarketMakers(whichmay things, providemarketstabilityandreducetransactiontime.TheBinance.US and CEO,CZ. fund itsstartupcamefrom,oratthedirectionof,Binanceprincipalowner infer thatallorasubstantialpartofthecapitalusedtoestablish Binance.US and timing, itspurpose,andtheoverlappingofficersdirectors,itisreasonableto Binance.US isoneofBinance’sfiatonramps. monitoring toolssuchason-chainforcryptocurrencytransactions. compliance andmonitoringsystemsforitsfiatgateways,whichincludedaily on theBinance.comwebsitethat“Binancehasimplementedsophisticated fiat onrampstomeetregulatorystandards,explaininginaJuly28,2020statement and WeiZhou,Binance’sCFO). Board directorshipsareheldbyBinanceofficers(CZ,Binance’sownerandCEO, Binance’s topofficers,WeiZhou(Binance’sCFO). filings indicatethatofthesethreeofficerpositions,twoareheldbyone officer positions:aCEO,chieffinancialofficer,andcorporatesecretary.The According tofilingswiththeCaliforniaSecretaryofState, Binance.US hasthree and offeredviaBinance websites, mobileapplications,clientsand Binance thatarebasedon Internetand/orblockchaintechnologies Binance Servicesrefertovariousservices providedtoyouby COMPLAINT -

”

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Binance’s partnershipwith Binance.USwould“openanewkeygateway toAmerica.”Inshort, in part: created BAM.AstatementthatappearedonBinance’swebsiteoraroundJune14,2019read, would bedoingbusinessas“BinanceUS.” United StatesTreasuryDepartment’sFinancialCrimesEnforcementNetworkandnotedthatit frictionless butalsoascompliantpossible.” . SoIthinkit’sreallyimportantforustoinvestandbuildthesebridges,makeitas “underlying visionbehindgoingintofiatisthat99.99%ofthemoneyinworldstill. . that Binancewasinvestinginonramp“bridges,”suchasBinance.US,statingBinance’s characterized thefiatonrampsBinancewasestablishingas“ourbusinesses.”Heexplained is merelyanillusion.InAugust2019interview,Binance,throughitsCFO,WeiZhou, exchange.” Binance hadputinplace whatitbelievedwasneededfor,inCZ’swords, “launchingaUS

Case 5:20-cv-06445Document1Filed09/14/20Page21of33 97. U.S. marketinfullregulatorycompliance.” Binance. “Binance.USwillbeledbyourlocalpartner BAMandwillservethe liquidity ofBinance.comtoNorthAmerica,”said CZ (ChangpengZhao),CEOof “We areexcitedtofinallylaunchBinance.USand bringthesecurity,speed,and 96. 95. 94. In aJune2019pressrelease,CZ(Binance’sfounder, owner,andCEO)statedthat In June2019,Binanceannounceditwas“launching”Binance.USthroughnewly- On oraroundJune11,2019,BAMTradingServices,Inc.registeredwiththe When asked,BinancehasindicatedthatBinance.USisaseparatebusiness,butthis Binance.US—is aserviceprovidedbyBinance. Gateway”—one ofwhichisSanFrancisco-basedBAMd/b/a In short,Binance’sTermsofUseinformconsumersthata“BinanceFiat provided byBinance. existing servicesofferedbyTrustWalletandnoveltobe Research, BinanceChain,X,FiatGateway, Binance Charity,Info,Launchpad, Platforms, thefinancingsector,BinanceLabs,Academy, Binance ecosystemcomponentsasDigitalAssetTrading development). BinanceServicesincludebutarenotlimitedtosuch other forms(includingnewonesenabledbyfuturetechnological COMPLAINT -

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contacts withtheStateof CaliforniashouldbeimputedtoBinance. “Binance.US bringsyouthetrustedtechnologyfrom theworld'sleadingcryptoexchange, assure usersthatthetwowereessentiallysame. Binance.US’swebsiteexplainsthat but statedthatintheprecedingthreemonthsBinance.US hadtripleditsnumberofusers. Binance.US, explainedduringaninterviewthatBinance.US wouldnotbesharing“usernumbers” United States. to moveitsU.S.customerbaseBinance.US,Binancehadmorethan1,000,000usersinthe benefit fromindividualsinCaliforniausingBinance.UStotradecryptocurrencies. regulations. Asaresult,throughBinance.US,Binancewasabletocontinuerealizefinancial Binance tohaveaU.S.extensionthatservedBinance’scustomersincompliancewith restrictions onitsU.S.customerstoforcethoseusersmoveBinance.US.Thisenabled gains.” Binance’sactions,andCZ’sstatement,demonstratethatBinancehadbegunplacing Binance.com accompanyingthis.Butsomeshorttermpainsmaybenecessaryforlong 2019, andreferringtothecreationofBinance.US,CZstated“Therewillbe afewrestrictionson implementing werepartofBinance’sstrategyforoperatingintheUnitedStates.OnJune24, the timeBinance.USbecamefullyoperationalinSeptemb Binance didthist “Binance isunabletoprovideservicesanyU.S.person”andcreateda90 Binance changedthenewuser“termsandconditions”languageonitsownwebsitetostate Binance.US Binance.” Binance’s U.S.userstocontinuemaketradesanddepositfundsthroughtheBinance.comsite.

Case 5:20-cv-06445Document1Filed09/14/20Page22of33 103. 102. 101. 100. 99. 98.

platform. ThedayafterBinance.USwasannouncedtothepublicinJune2019, Accordingly, Binance.US isBinance’salterego.Asaresult,Binance.US’s The Binance.USwebsitewasdesignedtolooklike Binance’swebsiteandto In May2020,Binance.US’sCEO,whomBinancehadrecruitedandplacedat Upon informationandbelief,shortlybeforeBinancebeganimplementingitsplan Binance’s founder,CZ,acknowledgedthattheU.S.userrestrictionsBinancewas As partofitsplan,BinancethentookstepstomoveU.S.customersthe o moveitsU.S.customerbasetoBinance.US—Binance’sextension—by COMPLAINT -

er 2019.

- day “grace”p eriod for

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§ 3336,Plaintiffseeksthe valueofthelaunderedbitcoinattimeconversion, withthe conversion ofpersonalproperty whosevalueexceeds$75,000.Pursuant to CaliforniaCivilCode the hackerswereengagingintransactionsinvolving thestolenbitcoin. knowledge ofthehackers’conversion.Assuch, Binance isliableforconversion. value, Binancehadactualknowledgeofthehackers’ conversion,andBinancehadconstructive innocent purchaserforvalueingoodfaith,because Binancedidnotpurchasethesebitcoinfor such, Binancewrongfullyconvertedthe1,451.7bitcoin. volume andfrequencyoftransactionsontheBinanceexchangeasaresultZaifhack.As from theZaifexchangehadbeentransmittedtoBinanceaccounts,andbecauseofsuspicious constituting theft,bothbecause,amongotherthings,Binancewasinformedthatbitcoinstolen possess thatbitcoin. fraction ofthe1,451.7bitcoin,hackvictimsstillownedandhadrighttoimmediately from usingorpossessingthe1,451.7bitcoin. intentionally exercisedcontroloverthebitcoininsuchawayastoexcludeallbutthieves Binance intentionallytookpossessionofandassumedcontroloverthe1,451.7bitcoin. mere righttopaymentforthevalueofthesebitcoin. The hackvictimsownedandhadtherighttoimmediatelypossess1,451.7bitcoin,notjusta the righttoimmediatelypossess1,451.7bitcointhatwouldbelaunderedthroughBinance.

Case 5:20-cv-06445Document1Filed09/14/20Page23of33 111. 110. 109. 108. 107. 106. 105. 104. As adirectandproximate resultoftheforegoing,Plaintiffsufferedwrongful Binance hadtheabilitytofreezeaccountson Binanceexchangethroughwhich In addition,whenBinanceacceptedthestolen1,451.7bitcoin,wasnotan Binance knewthepropertyitreceivedwasstolenorobtainedinamanner Each timeBinanceintentionallytookpossessionofandassumedcontrolovereach When thestolenbitcoinwas depositedbythethievesintoaccountsatBinance, On September14,2018,atthetimeofhack,hackvictimsownedandhad The allegationsaboveareincorporatedbyreference. COUNT ONE (Conversion) COMPLAINT CLAIMS -

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property. interest fromthattime,aswellfaircompensationforthetimeandmoneyspentinpursuitof

transactions comingfrom thethieves’publicaddressesonblockchain; (5) Binance facilitated bitcoin wasbeinglaundered throughBinance,andwhenBinancehadthe abilitytoidentifythe to depositthestolenbitcoin intoBinanceaccounts,whenhadalready learnedthatstolen accounts andfreezealltransactionstoorfromthem; (4) Binancecontinuedtoallowthehackers was beinglaunderedthroughBinance,andwhen Binancehadtheabilitytoidentifythese by thehackerstolaunderstolenbitcoin,when Binancehadalreadylearnedthatstolenbitcoin and identificationofthethieves; (3) Binancerefused to freezethespecificBinanceaccountsused unlimited numberofanonymoustradingaccounts onitsexchange,thereby hinderingdetection meaningful identificationorKYCinformation; (2) Binanceenabledthethievestoopenan accounts andtransactontheexchangeinamountsbelow2bitcoinswithoutprovidingany opening ofaccounts,deposits,andwithdrawals,inthatBinanceallowednewusers toopen 1,451.7 bitcoinbecause,amongotherthings,(1)Binanceemployedatypicalpoliciesrelatedtothe KYC information. the exchangeinamountsbelow2bitcoinswithoutprovidinganymeaningfulidentificationor accounts, deposits,andwithdrawals,inthatitallowednewusers toopenaccountsandtransacton laundered throughBinance;and(3)Binanceemployedatypicalpoliciesrelatedtotheopeningof from thehackwereatypical,suspicious,andraisedaninferencethatstolenfundsbeing accounts; (2)thevolumeandfrequencyoftransactionsonBinanceexchangethatresulted was informedthatbitcoinstolenfromtheZaifexchangehadbeentransmittedtoBinance converted bitcoinwasbeinglaunderedthroughBinancebecause,amongotherthings,(1) victims, includingthe1,451.7bitcoinlaunderedthroughBinance,asdescribedabove.

Case 5:20-cv-06445Document1Filed09/14/20Page24of33 115. 114. 113. 112. Binance substantiallyassistedandencouragedthethieves’conversionof Binance hadactualknowledgeofthewrongfulconversionandthat1,451.7 On September14,2018,thieveswrongfullyconvertedbitcoinfromthehack The allegationsaboveareincorporatedbyreference. (Aiding andAbettingConversion) COUNT TWO COMPLAINT -

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money spentinpursuitoftheproperty. time ofconversion,withtheinterestfromthattime,aswellfaircompensationforand property whosevalueexceeds$75,000.Plaintiffseekstheoflaunderedbitcoinat Binance earnedfeesoneachtransactioninvolvingtheconvertedbitcoin. victims’ bitcoinandgetawaywithit. money laundering.Binance’sconduct,asdescribedabove,enabledthehackerstostealhack laundering, orthroughitsemployeesconsciouslyfailedtofollowownpoliciesprevent Binance eitherconsciouslyimplementedpoliciesthatwereinadequatetopreventmoney stolen bitcoinwasbeinglaunderedthroughBinance;and(6) uponinformationandbelief, transactions ontheBinanceexchangeofstolenbitcoin,when hadalreadylearnedthat

the hackvictims. through Binance,wastransferred awayfromaccountsontheZaifexchange, causingdamage to because thecyber-thievespresentedprivatekeys. had therighttocontrolbitcoin.Zaifjustifiably relied on thethieves’falserepresentation, made itwiththeintenttodefraudandinduceZaif tobelievetheywerethe actual ownersofand Binance. right tocontrolthehackvictims’bitcoin,including1,451.7bitcoinlaunderedthrough bitcoin, thethievesfalselyrepresentedtoZaifthattheywere actual ownersofandhadthe on September14,2018,aftergainingaccesstotheprivatekeysthatcontrolledhackvictims’ the hackvictims’bitcoin,including1,451.7bitcoinlaunderedthroughBinance. Specifically,

Case 5:20-cv-06445Document1Filed09/14/20Page25of33 117. 116. 121. 120. 119. 118. As adirectandproximateresultoftheforegoing,Plaintiffsufferedloss Binance benefitedsignificantlyfromthelaunderingofconvertedbitcoin,as As aresult,thehackvictims’bitcoin,including 1,451.7bitcoinlaundered When thethievesmadethisfalserepresentation, theyknewitwasf On September14,2018,thecyber-thievescommittedfraudtoobtainandlaunder The allegationsaboveareincorporatedbyreference. (Aiding andAbettingFraud) COUNT THREE COMPLAINT -

alse, andthey

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Binance earnedfeesoneach transactioninvolvingthebitcoin. described above,enabled thehackerstostealhackvictims’bitcoinand getawaywithit. consciously failedtofollowitsownpoliciesprevent moneylaundering.Binance’sconduct,as implemented policiesthatwereinadequatetoprevent moneylaundering,orthroughitsemployees laundered throughBinance;and(6)uponinformation andbelief,Binanceeitherconsciously exchange ofthestolenbitcoin,whenBinancehad alreadylearnedthatstolenbitcoinwasbeing thieves’ publicaddressesontheblockchain;(5) Binance facilitatedtransactionsontheBinance through Binance,andwhenBinancehadtheabilitytoidentifytransactions comingfromthe Binance accounts,whenhadalreadylearnedthatstolenbitcoinwasbeinglaundered or fromthem;(4)Binancecontinuedtoallowthehackersdepositstolenbitcoininto Binance, andwhenBinancehadtheabilitytoidentifytheseaccountsfreezealltransactions stolen bitcoin,whenBinancehadalreadylearnedthatbitcoinwasbeinglaunderedthrough (3) Binancerefusedtofreezethespecific Binanceaccountsusedbythehackerstolaunder accounts onitsexchange,therebyhinderingdetectionandidentificationofthethieves; information; (2)Binanceenabledthethievestoopenanunlimitednumberofanonymoustrading exchange inamountsbelow2bitcoinswithoutprovidingany meaningful identificationorKYC deposits, andwithdrawals,inthatBinanceallowednewuserstoopenaccountstransactonthe among otherthings,(1)Binanceemployedatypicalpoliciesrelatedtotheopeningofaccounts, amounts below2bitcoinswithoutprovidinganymeaningfulidentificationorKYCinformation. and withdrawals,inthatitallowednewuserstoopenaccountstransactontheexchange Binance; and(3)Binanceemployedatypicalpoliciesrelatedtotheopeningofaccounts,deposits, were atypical,suspicious,andraisedaninferencethatstolenfundsbeinglaunderedthrough the volumeandfrequencyoftransactions on theBinanceexchangethatresultedfromhack informed thatbitcoinstolenfromtheZaifexchangehadbeentransmittedtoBinanceaccounts;(2) bitcoin wasbeinglaunderedthroughBinancebecause,amongotherthings,(1)

Case 5:20-cv-06445Document1Filed09/14/20Page26of33 124. 123. 122. Binance benefitedfrom the launderingoffraudulently-obtained bitcoin,as Binance substantiallyassistedandencouragedthecyber-thieves’ fraudbecause, Binance hadactualknowledgeofthehackers’fraud and thatthe1,451.7stolen COMPLAINT -

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through whichthehackers wereengagingintransactionsinvolvingthestolen bitcoin,afterbeing theft, by,amongotherthings, failingtotakestepsfreezeaccountsonthe Binance exchange property fromtheowners, knowingthepropertywasstolenorobtainedin amannerconstituting frequency oftransactionsontheBinanceexchange asaresultoftheZaifhack. exchange hadbeentransmittedtoBinanceaccounts, andbecauseofthesuspiciousvolume both because,amongotherthings,Binancewasinformed thatbitcoinstolenfromtheZaif manner constitutingtheft. withholding stolenpropertyfromtheowners,knowingwasorobtainedina manner constitutingtheft. obtained inamannerconstitutingtheft,knowingthepropertyhadbeenstolenor suit, andreasonableattorney’sfees.” an actionforthreetimestheamountofactualdamages,ifany,sustainedbyplaintiff,costs provides that“Anypersonwhohasbeeninjuredbyaviolationofsubdivision(a).maybring more thanoneyear,orimprisonmentpursuanttosubdivision(h)ofSection1170.”496(c) the propertytobesostolenorobtained,shallpunishedbyimprisonmentinacountyjailfornot withholds, oraidsinconcealing,selling,withholdinganypropertyfromtheowner,knowing theft orextortion,knowingthepropertytobesostolenobtained,whoconceals,sells, receives anypropertythathasbeenstolenorobtainedinmannerconstituting damages. including thelossofpropertywhosevalueexceeds$75,000,expectancydamages,andpunitive

Case 5:20-cv-06445Document1Filed09/14/20Page27of33 126. 131. 130. 129. 128. 127. 125. The allegationsaboveareincorporatedbyreference. Binance aidedtheZaifhackersinconcealingorselling orwithholdingstolen Binance knewthepropertywasstolenorobtained inamannerconstitutingtheft, Binance violatedSection496byaidingtheZaifhackersinconcealingorselling Binance violatedSection496byreceivingpropertythathadbeenstolenor California PenalCodeSection496(a)provides“Everypersonwhobuysor As adirectandproximateresultoftheforegoing,Plaintiffsuffereddamages, (Violation ofCal.Pen.Code§496) COUNT FOUR COMPLAINT -

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cases, suchabusinessqualifies asacoveredMSBifit“(1)acceptsandtransmits aconvertible currency, concludingthat thelattertwoqualifyasMSBsunlessanexemption applies. Inboth currency topurchasegoods orservices”(a“user”)fromexchangersand administrators ofvirtual 31 U.S.C.§§5311-5330.Indoingso,FinCENdistinguished thosewhomerelyuse“virtual therefore qualifyasmoneyservicesbusinesses(“MSB”) regulatedundertheBankSecrecyAct, currency,” andthatcertainpersonsadministering, exchanging,orusingvirtualcurrencies Network (“FinCEN”)concludedthat“virtualcurrency” isaformof“valuethatsubstitutesfor (2013); Zhangv.Super.Ct.(Cal.CapitalIns.Co.),57Cal.4th364(2013). as abasisforUCL“unlawful”violation.Rosev.BankAmerica,N.A,57Cal.4th390,393 Lending 1stMortg.,583F.Supp.2d1090,1098(N.D.Cal.2008). No. C09-02727CRB,2009WL2612312,at*4(N.D.Cal.Aug.24,2009);Plascenciav. asserted againstapersonforaidingandabettingwrongfulconduct. standards ofprofessionalconductandcommonlawdoctrines.Forexample, statutes, federalregulations,statelocalordinances,priorcaselaw, types ofbusinessactivities. 17200– the amountofactualdamagessustained,costssuit,andreasonableattorney’sfees. property whosevalueexceeds$9,000,000.PursuanttoSection496(c), Plaintiff seeksthreetimes exchange. notified thatbitcoinstolenintheZaifhackhadbeentransmittedtoaccountsonBinance

Case 5:20-cv-06445Document1Filed09/14/20Page28of33 17209 (“UCL”),forbidsunlawful,unfair 137. 136. 135. 134. 132. 133. In 2013,theUnitedStatesTreasuryDepartment’s FinancialCrimesEnforcement Federal andstatestatutesthathavenoprivaterightofactioncannonethelessserve “Unlawful” claimsundertheUCLmaybepredicatedon,amongothers,federal California’s unfaircompetitionlaw, As adirectandproximateresultoftheforegoing, Plaintiff sufferedthelossof The allegationsaboveareincorporatedbyreference. (Violation ofCalifornia’sUnfairCompetitionLaw)

COUNT FIVE COMPLAINT , - or fraudulentconductinconnectionwithvarious

- California BusinessandProfessionsCode §§

See Chetal v.Am.HomeMortg.,

UCL claimsmaybe

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based. Specifically,theFinCENnoticestated,inpart: who dealwithU.S.customersaresubjecttoFinCENregulations,irrespectiveofwherethey exchanges. anti-money launderingstandardsandprotocolsgenerallyrecognizedbycryptocurrency from beingusedtofacilitatemoneylaunderingactivities. and maintainaneffectivewrittenAMLprogramthatisreasonablydesignedtopreventtheMSB hack, andcontinuingtothepresent,Binancehasbeenan MSBundertheBankSecrecyAct. virtual currencyor(2)buyssellsconvertibleforanyreason.” BeforetheZaif Binance wasawareofthis FinCENnoticebeforetheSeptember2018Zaif hack.

Case 5:20-cv-06445Document1Filed09/14/20Page29of33 • • • should notethefollowing: the BSAwhenprovidingfinancialservicestoforeign-located MSBs.Financialinstitutions FinCEN isissuingthisAdvisorytoadvisefinancialinstitutionsoftheirobligationsunder location. engaging incoveredactivitieswithintheUnitedStates,regardlessofperson’s physical foreign locations.FinCENseekstoensurethattheBSArulesapplyallpersons make itincreasinglypossibleforpersonstoofferMSBservicesintheUnitedStatesfrom Rule aroseinpartfromtherecognitionthatInternetandothertechnologicaladvances agents, agencies,branchesorofficesarephysicallylocatedintheUnitedStates.TheFinal Act (BSA)regulationsbasedonitsactivitieswithintheUnited States, evenifnoneofits An entitymaynowqualifyasamoneyservicesbusiness(MSB)undertheBankSecrecy 140. 139. 138.

presence intheUnitedStates. violations oftheBSAand itsimplementingregulationsasMSBs withaphysical Foreign-located MSBsare subjecttothesamecivilandcriminalpenalties for They mustalsoregisterwithFinCEN. reporting, andanti-moneylaundering(AML)program requirementsundertheBSA. activities intheUnitedStates,foreign-located MSBs must complywithrecordkeeping, Foreign-located MSBsarefinancialinstitutionsunder theBSA.Withrespecttotheir providing servicestocustomerslocatedintheUnited States. whether ornotonaregularbasisasanorganized orlicensed businessconcern,is C.F.R. 1010.100(ff).Relevantfactorsincludewhether theforeign-located person, substantial partwithintheUnitedStates,inoneor moreofthecapacitieslistedin31 To qualifyasanMSB,aperson,whereverlocated,mustdo business, whollyorin In February2012,aFinCEN-issuednotice,FIN-2012-A001,explainedthatMSBs Before theZaifhackinSeptember2018,Binance had significantknowledgeof The BSAanditsimplementingregulationsrequireMSBstodevelop,implement, COMPLAINT -

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Binance’s exchangeenabled (andstillpermits) individualstotradeorwithdraw upto2bitcoin laundering regulationsand failedtomeetrequirementsimposedonMSBs. Forexample, regulations MSBsarerequiredtoadhereto. the lawbyfailingtoregisterasamoneytransmitting business. 1010.l00(f)(5), 1022.380(a)(2).PriortotheSeptember 2018Zaifhackandsince,Binanceviolated transmitting businessesdoingsubstantialbusinessintheUnitedStates. regulations pursuanttothatstatute.Thespecificallyapplyforeign-based money Secretary oftheTreasuryasrequiredbyaseparatestatute,31 U.S.C.§5330,andfederal transmitting business”ifthebusinessisnotregisteredasamoneywith wire, check,draft,facsimileorcourier.” Thisstatutemakesitaviolationtoconduct“money and allmeansincluding,butnotlimitedtotransferswithinthiscountryorlocationsabroadby business. Thetermmoneytransmittingincludes “transferring fundsonbehalfofthepublicbyany under FinCEN’sregulations. exchanger” ofvirtualcurrenciesandthereforeanMSB—specifically, amoneytransmitter— Binance. and nolimitationorexemptionfromthedefinitionof“MSB”“moneytransmitter”appliesto to theperson.”BinancewasawareofthisFinCENnoticebeforeSeptember2018Zaifhack, specifically, amoneytransmitter,unlesslimitationtoorexemptionfromthedefinitionapplies FinCEN explainedthat“anadministratororexchangerisanMSBunderFinCEN’sregulations, creating, obtaining,distributing,exchanging,accepting,ortransmittingvirtualcurrencies. specifically addressedtheapplicabilityofregulationsimplementingBSAtopersons FinCEN’s RegulationstoPersonsAdministering,Exchanging,orUsingVirtualCurrencies,”

Case 5:20-cv-06445Document1Filed09/14/20Page30of33 145. 144. 143. 142. 141. Prior totheSeptember2018Zaifhack,Binance failed tocomplywithanti-money At alltimesrelevanttothisaction,Binancehasviolated theBSA,including 18 U.S.C.§1960makesitacrimetooperateanunlicensedmoneytransmitting At alltimesrelevanttothisaction,Binancehasbeenan“administratoror In March2013,aFinCEN-issuednotice,FIN-2013-G001,titled“Applicationof COMPLAINT -

See C.F.R.§§

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exceeding $9,000,000. laundering andbytheactualharmthatresulted. outweighed bythethreatofharmtoPlaintiffandCalifornia’spublicpolicyagainstmoney motive, orjustificationBinancehadforrefusingtoimposeKYCrequirementswasfar hackers tounlawfullytransferbitcoinfromtheZaifexchangeBinance’sexchange.Anyreason, inasmuch as,amongotherthings,Binance’sfailureimposeKYCrequirementscausedtheZaif September 2018,includingtheactivity describedabove.Binance’sactivitywasunfairto Plaintiff activity describedabove,BinanceengagedinunlawfulconductprohibitedbytheUCL. aided, abetted,andenabledmoneylaundering. to tradeandwithdrawbitcointhoughtheBinanceexchangewithoutprovidingidentification the placetogolaunderstolencryptocurrency. deliberately chosetoignoreKYCprotocols,therebysignalingcyber-thieves thatBinancewas permits thethievestohidetheiridentities. Binance knewthispriortotheZaifhackbut customer (“KYC”)protocolsrequiredbyanti-moneylaunderingstandards. per 24hourswithoutrequiringthemtoprovideidentification,

plaintiff sufferedinjury, [4] theclosenessofconnectionbetween defendant’s conductand affect theplaintiff,[2] foreseeabilityofharmtohim,[3]thedegree certaintythatthe duty toprotectagainsteconomicloss:“[1]theextent towhichthetransaction wasintendedto financial transactions.Thefoundationalcaseon this subjectoutlinessixfactorsforestablishinga

Case 5:20-cv-06445Document1Filed09/14/20Page31of33 150. 149. 148. 147. 146. 152. 151. Asadirectandproximateresultoftheforegoing, Plaintiff sufferedlosses By engaginginunfairactivityprohibitedbytheUCL,bothbeforeandafter By engaginginunlawfulactivitybeforeandafterSeptember2018,includingthe BeforetheZaifhackinSeptember2018,Binancewasawarethatallowingpeople Binance’s noncomplianceencouragesand attractsmoneylaunderingbecauseit California lawimposesadutytopreventpurelyeconomic losstothirdpartiesin The allegationsaboveareincorporatedbyreference. COMPLAINT COUNT SIX (Negligence) -

i.e., withoutimposingknowyour

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trust forPlaintiffwithadutytoconveythesame toPlaintiff. involuntary trusteeholdingsaidbitcoins,property orvalue, and profitstherefrom,inconstructive that wasimproperlyobtainedfromZaifandtransferred totheBinanceexchange.is Binance hasnolegalorequitablerightinterest in,orclaimto,anybitcoins,propertyvalue $9,000,000. laundering. hiding theiridentities,andpublicpolicyclearlyfavorspreventingunlawfultheftsmoney suspicious transactionsenabledmoneylaundererstocompletethelaunderingprocesswhile procedures facilitatedmoneylaunderingthroughtheBinanceexchangeandthatafailuretofreeze to Binance’sconductinthatbeforetheSeptember2018hackBinancewasawareitslax and failuretofreezethesuspicioustransactionsinjurysuffered,moralblameisattached injury, thereisacloseconnectionbetweenBinance’sfailureto implement properKYCprotocols the stolenfundswithouthavingtorevealtheiridentities,thereisnodisputethatPlaintiffsuffered hack—in thisinstance,Plaintiff—wouldoccurifthehackerswereprovidedanavenuetolaunder stealing cryptocurrencyfromtheZaifexchange,itwasforeseeablethatharmtovictimofa laundering transactions.ThetransactionswereintendedtoadverselyaffectPlaintiffby failing toimplementappropriateKYCprotocols andbyfailingtotakestepsfreezethe preventing futureharm.”Biakanjav.Irving,49Cal.2d647,650(1958). the injurysuffered,[5]moralblameattachedtodefendant’sconduct,and[6]policyof

Case 5:20-cv-06445Document1Filed09/14/20Page32of33 156. 155. WHEREFORE, Plaintiff praysforreliefandjudgmentasfollows: 154. 153. By reasonofthefraudulentandotherwisewrongfulconductdescribedabove, Plaintiff incorporatestheallegationsabove. As aresultofBinance’sactionsandinactions,Plaintiffsufferedlossesinexcess Binance owedadutytoPlaintiffandbreachedthatby,amongotherthings, PRAYER FORRELIEF (Constructive Trust) COUNT SEVEN COMPLAINT -

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Date: including areasonableallowanceoffeesforPlaintiff’s attorneysandexperts; fraud claim; disgorgement ofprofitsearnedbyBinanceforthewrongdoingallegedabove; Plaintiff againstDefendantinanamounttobedeterminedattrial,includinginterest,and/or

Case 5:20-cv-06445Document1Filed09/14/20Page33of iyHuh By:/s/LilyHough September 14,2020 Plaintiff demandsajurytrialonallissuessotriable. (d) (c) (b) (a) Awarding Plaintiffsuchotherandfurtherreliefasthe Courtdeemsappropriate. Awarding Plaintiffitsreasonablecostsandexpensesincurredinthisaction, Awarding Plaintiffpunitivedamagesaccordingtoprooffor itsaidingandabetting Awarding compensatorydamages,expectancyandrestitutioninfavorof

C Barton R.Keyes(prohacvicemotionpending) C. BenjaminCooper(prohacvicemotionpending) Rex H.Elliott(prohacvicemotionpending) Charles H.Cooper,Jr.(prohacvicemotionpending) (415) 373-9435(fax) (415) 212-9300 San Francisco,California94107 123 TownsendStreet,Suite100 [email protected] Edelson PC Lily Hough(SBN–315277) [email protected] Rafey Balabanian(SBN–315962) (614) 481-6001(fax) (614) 481-6000 Columbus, Ohio43221 2175 RiversideDrive FISCO CRYPTOCURRENCYEXCHANGE,INC, Respectfully submitted, OOPER OOPER JURY DEMAND COMPLAINT

& -

33 E LLIOTT

LLC