🛑 🕺 Binance danced to the wrong beat

The SEC believes the Binance $BNB token could be an illegal security!

Jonah Schulman
June 13, 2022

The Security Token Market tokenized crowdfund is approaching fast... Q3 FAST!

Are you ready to invest yet? We are more than 20% beyond capacity with more than $6.6M pledged from 1,179 people around the globe!

Gooood morning, Rainmakers! ☀️

As always, I have two captivating topics for you to dive into:

1️⃣  🛑 🕺 Binance danced to the wrong beat: The BNB token is under investigation by the SEC for being an unregistered security! Did they break any laws?

2️⃣  🛠 ADDX adds to their toolkit: ADDX did something no other security token marketplace has ever done before... and it might be a huge catalyst!

Without further ado, it's time to…

Get liquid 💧

🛑 🕺 Binance danced to the wrong beat

Binance. Binance. Binance.

You were one of the first trading platforms that went mainstream.

You have amassed over 30 million users and $7 Trillion in trading volume in 2021 and a profit of more than $900M in 2020. 

On the surface, those financial statistics are incredible, but when you look under the hood... it doesn't look great.

I personally didn't look under the hood, but the SEC has!

In fact, they are literally looking right now.

The SEC is investigating whether or not the ICO they conducted in 2017 was a sale of unregistered securities.

An important thing to keep in mind is that the SEC exclusively has oversight of the US jurisdiction for all matters relating to securities.

This means, that if Binance dealt with non-us investors the SEC wouldn't be touching them.

Firstly, let's break down what constitutes a security in the US via The Howey Test:

This test is a way for the SEC to analyze if a project should be viewed as a security or not.

The Howey Test:

1. Is there an investment of money?

2. Is there an expectation of profits from the investment?

3. Is there an investment of money in a common enterprise?

4. Is there a profit that comes from the efforts of a promoter or third party?

Binance offered 100 million BNB tokens for $.15 and all tokens were sold for a total capital raise of $15M.

50% of the supply went to investors and the executive team, while the other half went to the public.

The part that perplexes me the most is the fact that BNB uses an auto-burn mechanism to increase the scarcity and value of the token.

In order to do this, they use 20% of their profits to buy back and burn the BNB tokens until half of the supply has been burned.

Do you know what happens to token prices when the supply is reduced?

It goes up!

To me, it sounds like an indirect dividend distribution to token holders.

The BNB holders may not be given the direct distributions of Binance's profit, but their token appreciates in value from the burning mechanism which occurs via profits; therefore, holders are being rewarded for the company's performance.

Unfortunately for Binance, this looks a little suspect to me.

In the scenario that BNB is been deemed an illegal security, it's okay because there's a nice, warm, and compliant home for them in the form of a security token!

This would cause ripple effects (no pun intended) throughout the industry and many other blockchain projects would be on watch.

🛠ADDX adds to their toolkit

ADDX just raised $58M from massive legacy financial incumbents, but the pedal is still to the medal as they just announced something arguably bigger.

They figured out a way to expand their accredited investor base by recognizing cryptocurrencies as financial assets.

They are now the first financial institution in Singapore to recognize cryptocurrency assets for the purposes of onboarding accredited investors!

What does this mean?

It means that more investors will be able to participate in security token investing in Singapore with ADDX at least for now.

After all, in Singapore, all of the private placements and opportunities in security tokens have been exclusive to accredited investors, but have been excluding crypto whales from qualifying.

This announcement could be a catalyst as the crypto investors who now qualify as accredited already understand tokenized assets; therefore, investing in security tokens is a no-brainer for them.

I think it's safe to say if it hasn't been said already, that cryptocurrencies are here to stay and they are going mainstream.

ADDX CEO Oi-Yee Choo had this to say:
“Cryptocurrencies are here to stay. They no longer exist only on the fringes of wealth and investment conversations. With a large minority of investors owning crypto, it is reasonable for these digital assets to be recognized as a part of one’s portfolio – not unlike any other assets that can be valued in the marketplace, such as real estate or equity. 

Investors increasingly expect a seamless view of their complete holdings because their traditional wealth and crypto wealth ultimately belong to a single portfolio. They want the best of both worlds. At a time when the markets are volatile, this move is also designed to enable crypto investors to diversify into the regulated private markets, which tend to be more stable across different phases of market cycles.”

ADDX CEO Oi-Yee Choo

Well, folks there you have it - the world is adopting crypto and the compliant security token world is welcoming them in.

What are you waiting for?

💦 What else is Drippin’

  1. The Security Token Market Crowdfund has passed $6.6M from 1,179 people in pledges:  Pledge now and reserve your spot to invest with us!
  2. SEC Investigating UST Stablecoin Blowup in Fresh Threat to Terra:  The whole Terra fiasco is being investigated and it doesn't look good for them.
  3. Realio Announces Its Plans to Trade the Realio Security Token on the tZERO ATS: Another new security token listed on tZERO?

Everything in this report is for informational and entertainment purposes only. Nothing in this report should be taken as financial advice or as an inducement to purchase or sell any security. Nothing in this market report should be used as legal advice. Always do your own research before making any decisions regarding financial transactions of securities.

Disclosures:

• No money or other consideration is being solicited, and if sent in response, will not be accepted;

 • No offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is filed and only through the platform of an intermediary (funding portal or broker-dealer); and 

• A person’s indication of interest includes no obligation or commitment of any kind.

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