Are These Cryptos Securities!? SEC vs. Binance Breakdown!!

the SEC has done it again crypto's most hated regulator has gone and crashed the market in order to protect investors this time it's suing binance us binance and binance's CEO Chang Peng Zhao as well as multiple entities affiliated with binance and CZ in its suit the SEC also states that 10 of the largest cryptos are securities including a stable coin now this is terrifying because it

foreshadows D listings for these cryptos and lawsuits for other exchanges that's why today I'm going to analyze the sec's reasoning and give you my take on what it could mean for the crypto Market if you hold any altcoins or stable coins you need to watch this video let's start with a quick recap to make sure we're all on the same page U.S Regulators have been scrutinizing

binance for years and it was reported last June that they were probing the exchange for allegedly offering Securities to U.S retail investors the recent lawsuit is likely a result of this probe note that I'll not be unpacking the allegations against Finance itself in this video this is mainly because of time and because the allegations are well pretty predictable so this video focuses exclusively on the sec's

investment of money meaning you buy it with money two in a common Enterprise meaning that the price action of the asset is the same for everyone who invested three with a reasonable expectation of profit meaning that you're expecting to make money from investing in the asset and four derived from the efforts of others meaning that the expectation of profit is coming from an identifiable third party

be it an individual institution or some combination of both now obviously almost every cryptocurrency meets the first three criteria it's the fourth Criterion where things can get complicated that's because sometimes it's not easy to identify a third party that's creating an expectation of profit for a particular coin or token these are quote sufficiently decentralized now this quote comes from former SEC director Bill Hinman who said

that eth was not a security because it was sufficiently decentralized the crypto industry has been wondering what that means ever since and we could soon have an answer on that front that's because Ripple managed to force the SEC to disclose related documents for now though the crypto industry continues to rely on the sec's reasoning in its lawsuits against the industry to try and understand how it

measures the fourth Criterion of the Harry test if you've watched our videos about these lawsuits you'll know this reasoning ranges from strict to nonsensical the reason why the SEC suit against binance is so significant is because it claims that 10 of the largest cryptocurrencies are securities specifically Solana cardano polygon filecoin Cosmos the sandbox decentraland algorand axi infinity and koti it also names BNB and the busd

stablecoin as securities now to be clear the SEC hasn't sued any of these crypto projects at least not yet even so it increases the risk that these cryptos will be delisted from U.S exchanges out of caution it should go without saying but you should be keeping any cryptos you're not actively trading on your personal crypto wallet especially during Times Like These the safest crypto wallets are

Hardware wallets and you can get discounts on the best ones at the coin Bureau deals page link is in the description now the first crypto on the list is Solana's Soul the suit's authors provide a brief description of the project and then point out that Soul can be staked and that a portion of all transaction fees are burned they point out that Seoul was sold across

various Ico rounds apparently with approval from the SEC they take issue with the fact that Solana Labs worked with crypto exchanges like binance us to get Soul listed they also take issue with the fact that Solana Lads made various statements which likely led to a reasonable expectation of profit from everyone who invested in Seoul the suit's authors then go on to take issue with the fact

that a large chunk of souls initial Supply was allocated to the team they highlight that lots of Soul was allocated to the Solana Foundation now this reminds me of comments made by SEC chairman Gary Gensler during a recent hearing if you watched the summary of that hearing you'll know that Gary implied that any crypto projects with non-profit organizations behind them could be securities this was a

bombshell because it was assumed that crypto projects could avoid regulatory scrutiny by giving legal ownership of their projects to their foundations anyways the authors of the suit then complain that Solana had multiple social media accounts which the company and team used to promote the project what's scary is that they take issue with the fact that soul is deflationary due to its transaction fee Burns they argue

that this counts as an expectation of profit this is worrying because ethereum's EIP 1559 upgrade from the summer of 2021 introduced simile deflationary tokenomics due to fee Burns eth hasn't been referred to as a security by the SEC in any of its lawsuits so far which could be very good or very bad news depending on your interpretation now the second crypto on the list is cardano's

Ada the authors provide a brief description of the project and randomly acknowledge that it's energy efficient they point out that input output Hong Kong or iohk conducted an Ico between 2015 and 2017. apparently without approval from the SEC they correctly point out that there are three entities behind cardano iohk in mergo and the cardano foundation they take issue with the fact that these entities received a

portion of Ada's initial Supply at Ico they also take issue with statements and activities by these entities that allegedly created expectations of profit notably they take issue with the fact that iohk has been the primary developer on cardano and point to multiple examples of problematic statements and activities including the creation of smart contracts what's interesting is that there's no mention of Charles hoskinson's social media activities

and come to think of it there doesn't seem to be any scrutiny around Ada staking either I wonder why that is I vaguely remember reading that ADA staking is technically different from other forms of cryptos taking so if anyone can refresh my memory about this in the comments section that would be wonderful anywho moving on the third crypto on the list is polygons Matic now this

one isn't all that surprising considering that one of the Project's co-founders literally told us media that the company wouldn't be issuing a stock because it already had the Matic token you'll know this if you've been keeping up with our polygon updates oddly enough the co-found in question isn't mentioned in the lawsuit's overview of the project it only mentions the original founders the suit's authors point out

that polygon conducted multiple Matic sales and seemed to take issue with the fact that one of these sales took place on binance itself naturally they take issue with the fact that polygon announced that it would be selling massive amounts of Matic to fund its development that are part of matic's initial Supply went to the team and that the team frequently talked about matic's price funnily enough

the suit includes a quote from the same fireside chat where one of polygon's co-founders tacitly admitted that Matic was akin to a stock in polygon but it provides a much less damning quote as evidence the authors also seem to have misspelled the co-founder's name classic sec and finally the suit's authors take issue with the fact that Matic also has a fee burning mechanism they specify that

the deflationary aspect is problematic as it creates an expectation of profit say it's almost like ultrasound money is not allowed in a hyperinflationary financial system who would have thought anyhow the fourth crypto is file coins fill now this one also isn't that surprising because there have been warning signs that the SEC had fill on its radar in recent weeks you'll know this if you've been keeping

up with our summaries of all the crypto hearings filecoin was mentioned as a security in one of them the authors again begin with a brief description of the project the difference this time is that the authors are a lot more detailed this could be because the Ico for Phil was one of the largest however I suspect that this is because the SEC is trying to Target

infrastructure that's critical to crypto namely defy for context filecoin is the incentive layer for the interplanetary file system or ipfs which is basically a decentralized Computing Cloud many D5 protocols have avoided regulatory scrutiny by hosting their front ends on ipfs if the SEC takes down filecoin then ipfs use could suffer and that would hurt defy anyway speculation aside the authors take issue with the statements made

by a filecoin's founder and protocol Labs the company behind filecoin and ipfs they also take issue with the initial allocation of fill to both entities they spend lots of time breaking down a document that details Phil's tokenomics as expected the authors object to Phil's fee burning mechanism and the resulting deflation I'll quickly note that the people in power fear deflation that's because it would cause them

to default on their debts meanwhile the average person's purchasing power would rise can't have that can we speaking of which the authors also seem to take issue with smart contracts this is because they're concerned about filecoin's plans to introduce a virtual machine this could be because it's another expectation of profit however I suspect that this is because smart contract cryptos compete with cbdc networks more about

the differences between cryptocurrencies and cbdcs in the description I digress now the key takeaway from the filecoin section is that the authors seem to have spent lots of extra time and effort targeting this particular crypto project they also focus a lot more on its founder and provide a long list of problematic things he said that run from the Project's first days to earlier this year peculiar

indeed maybe big Tech just doesn't want the cloud computing competition now the fifth crypto project in the sec's crosshairs is cosmos's atom in their description of the project the suits authors note that Cosmos provides quote services to the blockchains connected to it for reference Cosmos recently introduced interchange staking this makes me wonder if Cosmos would have been left out of this suit without this upgrade in

any case the authors point out that the interchain foundation conducted an Ico for atom and seemed to take issue with the fact that one of the Project's co-founders sits on its board similarly to cardano they take issue with the fact that there are just a handful of entities that develop the project as you might have guessed they also dislike the fact that these entities received a

portion of atom's initial Supply they object to statements made by these entities because they allegedly created an expectation of profit they again highlight announcements about atom being listed on exchanges now the sixth crypto is similarly straightforward and that's the sandbox's sand in their description of the project the authors note that the sandbox was acquired by animoker brands in 2018. this is interesting because animoker Brands appears

to have close connections to Hong Kong authorities and Elites more about that in the description moving on now the authors take issue with the fact that the sandbox conducted multiple token sales for sand as well as the fact that the team tried to get the token listed on exchanges they also note that a portion of sans initial Supply went to entities behind the project in contrast

to the other crypto projects scrutinized in this lawsuit the sandbox publicly stated that it would be managing sand supply and demand to support its price including buying and selling on exchanges the suit's authors object to this and if I'm being honest I reckon most people would now the seventh crypto is decentraland's mana and the sec's reasoning here is predictable by this point their issue is that

when the Ico was conducted a portion of mana's initial Supply was allocated to the team and that the team created the expectation of profit for Mana holders as a cherry on top the SEC takes issue with the fact that Mana is burned when purchasing Parcels of land fortunately the suit's authors do not say that these land Parcels are securities logically this suggests that there is some

process by which a crypto that's classified as a security becomes a commodity unfortunately we won't be getting any regulatory clarity about that anytime soon and we may never get regulatory clarity about this if an anti-crypto candidate is elected president in the U.S come 2024. you can find out where a current Front Runners stand by using the link in the description the eighth crypto is algorand's algo

now if you've been keeping up with our analysis of the sec's reasoning you'll recall that the regulator referred to algo as a security in its recent lawsuit against bittrex as well not surprisingly there are lots of similarities in this lawsuit but also some differences for the similarities the suits authors focus on the fact that the algorand foundation brought back most of the algo sold during the

Ico at 90 of the price they spend a lot of time talking about why algo is a security as I mentioned in the bittrex suit video this could be because algorand competes with cbdc's for the differences meanwhile there don't seem to be many and there weren't really any that stuck out to me this makes sense considering that the SEC wants to be consistent in its reasoning

for the same cryptos this is ironic considering that the SEC has been inconsistent with its reasoning between different cryptos oh well now the ninth crypto is axi Infinity's AXS what's odd is that the authors have an issue because AXS was sold for different prices to different investors they also pointed this out for the other projects which is odd because it could mean that the investment was

not in a common Enterprise but then again I'm not a Securities lawyer anyway I couldn't help but notice that the author's analysis of AXS is surprisingly short compared with that of the other cryptocurrencies it consists of the predictable pain points Ico sale initial allocation to the team and comments and actions by the team that created expectation of profit for AXS holders the only unpredictable pain Point

present is the fact that axi Infinity wasn't finished at the time that AXS was sold the selling of a crypto prior to a project being finished is something the SEC has brought up before yet it's something that it didn't seem to scrutinize as much with this particular set of cryptocurrencies anyway the 10th crypto is Cody's Coty and the author's breakdown is as short as the one

for AXS what's strange is that koti isn't as big as the others which begs the question of why it was included I suspect the answer has to do with its relationship to cardano Coty created the decentralized stablecoin Jed now call me crazy but the sec's targeting of koti could be additional evidence that it's going after defy related crypto projects after all Defy is direct competition for

the traditional banking system and Gary happens to have spent most of his career at Goldman Sachs don't worry though I'm sure he'll be objective anyway in all seriousness there are two more cryptos we need to cover and those are BNB and busd bnb's designation as a security is not at all surprising if you've watched our video about it and the other exchange tokens you'll know that

they are effectively exchange stocks complete with BuyBacks and burns the only eye-opening thing about the author's analysis of BNB was that they have evidence that us-based investors participated in the Ico they also have evidence that binance employees based in the US made Bank from their BNB based compensation on that note binance employees were allegedly encouraged to buy and hold BNB I dare not consider the damage

that will be done to these employees if bnb's price plummets now this seems guaranteed if busd goes down if you watched our video about stablecoin market caps you'll know that's because busd is used primarily on binance and in bnb's D5 ecosystem you'll also know that all the busd in circulation will have to be Redeemed by sometime early next year because of the Crackdown on paxos earlier

this year this brings me to what I believe to be the most important aspect of the sec's lawsuit against binance and that the sec's reasoning as to why the busd's table coin is a security this is so important because if the sec's reasoning can be applied to other stable coins then other U.S Stables like usdc could be at risk so if I understand correctly the authors

believe busd is a security because of the interest earning products and services being offered by binance such as Finance earn now this is bizarre because clearly the expectation of profit isn't coming from the stable coin in this case it's coming from binance itself what's even more bizarre is that the types of Interest earning products and services don't matter whether it was defy yields or binance paying

out of pocket any form of interest on busd apparently makes it a security Now this makes no sense because the interest isn't coming from busd but from third parties in the author's own words quote busd investors expectation of profits came from the potential for direct interest-like payments made by binance in part from the proceeds of deploying busd investors Capital but again this makes no sense because

this interest is not inherent to busd itself to add insult to injury the authors imply that even the trading incentives offered by binance for busd pairs makes it a security the only way this makes sense is if The Branding of busd binance USD somehow plays a role in classic SEC fashion this is not clear whatsoever so what does all of this mean for the crypto Market

well as I mentioned in the introduction the binance suit itself foreshadows lawsuits against other major crypto exchanges and as it so happens coinbase received its papers while we were putting this video together all I'm wondering is whether we're going to see any lawsuits against crypto projects as much as the SEC has huffed and puffed it hasn't blown the house down on any particular crypto heck it

hasn't even beaten Ripple and it's been over two and a half years since that battle began the absence of additional lawsuits could be because the SEC is hoping that it will win the Ripple case if it does it would set the precedent the regulator needs to go after other crypto projects every altcoin is a potential Target Gary has mentioned many times that the only crypto that

isn't a security is BTC now of course the one that everyone is worried about is eth especially after the sec's reasoning in this lawsuit there was an Ico a portion of eth's initial Supply went to the team companies like consensus and non-profits like the ethereum foundation have promoted the project and eth is also deflation room the biggest sin of all the thing is it's hard to

see which entities the SEC could sue consensus and the ethereum foundation are by no means the only entities that have been promoting ethereum eth is in fact sufficiently decentralized in this regard going after all these entities would be costly and probably impossible still it's actually a bit concerning that the SEC hasn't referred to eth as a security in any of its crypto lawsuits the only reason

I can think of as to why it would admit eth is because it's in the process of putting together an unprecedented case against ethereum let's hope that I'm wrong and that's all for today's video folks if you found it informative let me know by Smashing the like button and don't forget to subscribe to the channel and ping that notification Bell during Times Like These you need

to not only know what's going on but also understand it that's what we're here for if you're looking for a safe place to store your crypto or insist on trading all this volatility head on over to the coin Bureau deals page it's got trading fee discounts of up to 50 and bonuses of up to forty thousand dollars on some of the best exchanges as well as

discounts on Hardware wallets the link will be in the description thank you all for watching and I'll see you next time in the meantime be safe out there foreign [Music]