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SEC ruling on securities standards, issuing team discussing technology, token supply distribution, and implementing deflationary mechanisms are all crucial.

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SEC ruling on securities standards, issuing team discussing technology, token supply distribution, and implementing deflationary mechanisms are all crucial.

The U.S. Securities and Exchange Commission (SEC) recently accused Binance of listing 12 tokens that are unregistered securities. Apart from BUSD and BNB, it can be observed that common cryptocurrency projects, as long as they involve fundraising forms similar to ICOs, the project team holds a percentage of tokens through pre-mining, the team emphasizes on technical development for expected profits, and deliberately designed deflation mechanisms for expected profits, seem to be reported as securities by the SEC sooner or later before the U.S. Congress restricts the SEC's authority. The scope is quite extensive.

This article was co-written by editors, referencing the document SEC Complaint.

BUSD

After the SEC sued Binance, it separately analyzed the reasons for classifying BUSD as a security:

SEC accuses Binance: Why is BUSD considered a security? Paxos and Binance profit from BUSD?

We can infer the following:

  1. BUSD interest products cause trouble: Binance aggressively promotes the profit potential of BUSD, where holding BUSD can earn various "APY" annualized interest rates, including earning coins, margin, and futures products. For example, the "BUSD Reward Program" promises users to earn interest simply by holding BUSD on the Ethereum chain.

  2. BUSD is an investment contract: The SEC claims that since its inception, BUSD has been offered and sold as an investment contract, making it a security.

  3. Paxos and Binance profit together from BUSD: The SEC claims that Trust Company A (Note: A should be Paxos) agreed to invest BUSD reserve funds separately in bonds, and A and Binance agreed to equally distribute related interest income, with Binance using the profits to promote BUSD.

BNB

SEC's accusations include:

  1. Expected profits: Since the ICO, Binance has positioned BNB as a utility token and promoted potential returns for investors trading on the platform, along with the increasing demand and expected price rise of BNB as the platform develops. It has also referred to ICO participants as "investors" multiple times.

  2. Platform and team background hype: Binance's whitepaper boasts about its competitive advantages compared to other cryptocurrency platforms and attributes these advantages to CZ and his team's professional knowledge and experience in the trading platform.

  3. Pre-mining involvement: Binance's whitepaper declares that 40% of all BNB tokens will be retained, meaning 80 million BNB, for its "founder's team."

  4. Intentional deflation: Binance's whitepaper states that platform profits will be used to repurchase and burn BNB, with CZ publicly stating in an interview, "Financially, this has the same effect as dividends."

  5. Development commitments: Binance's whitepaper explains to investors the use of ICO funds, including platform development, branding and marketing, and reserve functions.

  6. Continuous promotion of investment potential: BNB is promoted in various programs and magazines, with investors being told that as Binance's profitability increases, so will the value of BNB.

  7. Efforts to increase BNB demand: Binance attempts to create more use cases for BNB to further increase its demand and value. For example, by launching the venture capital division Binance Labs to invest in apps related to BNB.

  8. Hyping employee preference for BNB: CZ has stated in interviews, "Almost all employees will receive part of their compensation in BNB. Many receive all their compensation in BNB. For them, it's an easy decision." Additionally, BNB has been used as an incentive to recruit employees.

Solana SOL

SEC's accusations include:

  1. Facilitating SOL listing in the US: In September 2020, Solana Labs tweeted about listing on FTX.US and Binance.US.

  2. Expected profits: Solana Labs continuously emphasizes initial CoinList sale performance and data, prompting SOL holders to anticipate future profits.

  3. Overly centralized and pre-mining: The initial 5 billion SOL tokens distributed 12.5% to founders and 12.5% to the Solana Foundation.

  4. Attracting adoption: Continuously issuing statements promoting "committed to developing Solana" to attract users, developers to adopt and hold SOL.

  5. Extensive marketing: Utilizing platforms like Solana's Podcast, Reddit, Discord, etc., for promotion.

  6. Technological hype: Emphasizing TPS exceeding 50,000, claiming Solana is mainstream, efficient, and 10,000 times faster than Bitcoin.

  7. Intentional deflation: Solana's CEO mentioned that a portion of SOL transaction fees would be burned, suggesting reduced SOL supply and increased profit potential for holders.

Cardano ADA

SEC's accusations include:

  1. Pre-mining involvement: Cardano Foundation, technical maintenance company Emurgo, and developer IOHK collectively pre-mined 5.2 billion ADA, accounting for 16.7% of the initial supply.

  2. Selling coins for development: The three entities use ADA sales revenue to drive Cardano's development, marketing, and operations.

  3. Promoting US listing: ADA has been listed on Binance.US since September 2019.

  4. Technology and marketing hype: The three entities emphasize positive Cardano development in various statements, such as the implementation of smart contract functionality in September 2021.

Polygon MATIC

SEC's accusations include:

  1. Polygon's token economic incentives: The whitepaper mentions that without MATIC token economic incentives, users would lack motivation to participate in the Polygon ecosystem.

  2. Expected profits: Polygon openly states that through crowdfunding funds, they will develop and expand the Polygon ecosystem.

  3. Technology and marketing hype: Polygon claims that a $4.5 billion financing round last February will position it just below BTC and ETH, ahead of all other public chains.

  4. Pre-mining involvement: The official reserves a large amount of tokens, approximately 67% of MATIC to support the ecosystem, while 20% goes to the team and advisors.

Filecoin FIL

SEC's accusations include:

  1. Selling coins for development: Continuously using token sales revenue since 2020 to develop and promote Filecoin.

  2. Expected profits: The "Filecoin Token Sales Economics" document states that selling Filecoin at a low price aims to reward ecosystem supporters and create value in various ways for early investors in the "Filecoin Primer" before the public sale.

  3. Technology and marketing hype: Protocols Labs continually emphasizes investing billions of dollars over the coming years to enhance the ecosystem, updates the roadmap, and describes the upcoming virtual machine FVM as a decentralized "core pillar of the next iteration."

Cosmos ATOM

SEC's accusations include:

  1. Pre-mining involvement: The Interchain Foundation raised approximately $17.3 million in crowdfunding in 2017 and provided a 25% discount to strategic partners. Initially, 10% of the token supply was allocated to ICF.

  2. Expected profits: Including ICF, co-founders Jae Kwon and Ethan Buchman's long-term statements reveal active development in Cosmos, increasing token holders' anticipated profits.

  3. Promoting US listing: ATOM has been listed on Binance and Binance.US in April and October 2019, respectively.

The Sandbox Sand

SEC's accusations include:

  1. Assisting token issuance: Animoca Brands subsidiary TSB raised $3 million through private sales and IEO on Binance in 2019, minting SAND tokens on Ethereum with a total supply of 3 billion.

  2. Expected profits: TSB's public information raises expectations of future profits for SAND holders, increasing demand and value for SAND. Additionally, they continuously advertise SAND's listings in various secondary markets.

  3. Pre-mining involvement: The Sandbox's whitepaper explicitly states that of the initially minted 3 billion SAND tokens, 19% will be allocated to The Sandbox's founders and team, with another 25.8% going to company reserves.

  4. Market manipulation: The Sandbox's whitepaper mentions the team controlling SAND supply and implementing a "controllable supply mechanism," such as purchasing SAND from various exchanges.

  5. Team background hype: The team members' past backgrounds and capabilities are praised multiple times in press releases and whitepapers, describing Sandbox's success and future development.

Decentraland MANA

SEC's accusations include:

  1. Expected profits: Information publicly disclosed by Decentraland leads MANA holders to reasonably view MANA as an investment, expecting profits from Decentraland's development, thereby increasing demand and value for MANA.

  2. Pre-mining involvement: During the ICO, 20% of MANA was distributed to the founding team, advisors, and early contributors, and 20% went to the Decentraland Foundation. Additionally, in public articles, they state, "To incentivize value creation within Decentraland, additional tokens will be distributed to the development team, organizations, and reserves to accelerate community and partner engagement."

  3. Rewarding adoption policies: The Decentraland whitepaper explains that the foundation will host various events to attract users, distributing economic rewards to new users to enable immediate participation in activities.

  4. Encouraging deflation: The Decentraland whitepaper and website promote a protocol where MANA is "burned" when used within the ecosystem.

Algorand ALGO

SEC's accusations include:

  1. Expected profits: When promoting the ALGO token sale, the Algorand Foundation combines blockchain's potential growth, token demand, and promises to ensure price floors. Through public statements, they commit to long-term holding of ALGO and incentivize participants to engage in network consensus mechanisms and support ecosystem development.

  2. Participatory governance for returns: The Algorand Foundation describes "governance" as a way for investors to earn returns on ALGO investments, allowing Algo holders to vote on Algorand's future and claiming it as the best way to earn rewards by holding Algo.

  3. Hyping future growth: The Algorand Foundation reports launching new initiatives to stimulate "ecosystem growth." The plan includes a series of loans to foster DeFi network growth and expand institutional investment in the ecosystem.

  4. External collaborations: The Algorand Foundation claims it will incentivize third-party participation and attract users to use the ALGO protocol. For example, they announced a $10 million incentive program to make the Algorand blockchain compatible with apps built on Ethereum.

Axie Infinity AXS

SEC's accusations include:

  1. Selling coins for development: Axie's developer Sky Mavis publicly explained that the funds raised through AXS sales are concentrated on developing and improving the Axie platform.

  2. AXS token economic incentives: Axie stated on Twitter that post-token sale proceeds would incentivize Sky Mavis team to continue building and announced that 21% of the AXS tokens will be issued to the team, gradually unlocking over 4 to 5 years to ensure team, community, and investor alignment.

  3. Product hype: Axie's whitepaper states that the Sky Mavis team will utilize its experience and efforts to develop and expand Axie, emphasizing that the core team will lead product development and supervision for rapid and responsive company building and updates to meet product market demands.

COTI

SEC's accusations include:

  1. Expected profits: The Coti team states that the goal of the IEO is to "ensure an efficient launch" and promote expanded community base, visibility, and liquidity. Additionally, they continuously emphasize the token sale's performance and data post-IEO.

  2. Attracting adoption: In the token purchase agreement, they promise that the proceeds from the token sale will be used for COTI project development, technical and ecosystem development.

  3. Team hype: Through articles, they promote the team and team culture, stating that they will continue to refine the team for COTI's success. They also boast expanding the team to demonstrate having many talented individuals.

  4. Promising future profit opportunities: They outline Coti's plans for 2023 and beyond, claiming to address payment challenges and attract more business attention, announcing expansion plans. They pledge that users can benefit from COTI's success by interacting through the app.