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(Reuters) – Yi He, a cofounder of the cryptocurrency exchange Binance Capital Management Co. Ltd, has a little joke in her Twitter bio: She lists her location as Mars. Binance’s chief growth officer, Ted Lin, identifies his location on Twitter as “decentralized.” Binance CEO Changpeng Zhao doesn’t include any location at all in his Twitter profile.
The mystery of the Binance execs’ physical location is no accident, according to lawyers from the Davillier Law Group. Davillier filed a class action complaint in federal court in Prescott, Arizona, in September, accusing Binance, its subsidiary CoinMarketCap OpCo and several individual defendants of rigging cryptocurrency rankings to drive down demand for HEX tokens, which allegedly compete with a Binance token.
The corporate defendants, represented by Goodwin Procter, accepted service of the lawsuit. But Davillier could not track down He, Lin and Zhao. The firm hired a private investigator, an ex-Marine bounty hunter. The investigator reported that despite an “exhaustive” search, he “was unable to definitively ascertain even in which country Changpeng Zhao, Yi He and Ted Lin were located.” Zhao could be in Taiwan, or possibly Singapore, the investigator said. Yi He might be in Malta. Lin was said to live in Dallas, but the investigator couldn’t confirm that.
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The murk surrounding their whereabouts, wrote Davillier lawyers George Wendt and Alexander Kolodin in a Nov. 15 filing to U.S. District Judge Susan Brnovich of Prescott, is consistent with Binance’s deliberate efforts to obfuscate its corporate location “to avoid regulators and dodge litigation.” The company was founded in China in 2017, the filing said, but has since shifted its headquarters to Japan and then Malta, with a holding company registered in the Cayman Islands and recent reports of a new base in Ireland.
Binance has repeatedly emphasized its decentralized operations, with its executives touting the company’s international reach. Plaintiffs cited a 2020 CoinDesk report entitled, “Binance Doesn’t Have a Headquarters,” which recounted an interview with Zhao at a cryptocurrency conference. When the interviewer asked the Binance CEO where the company is based, the article said, “Zhao reddened; he stammered. He looked off-camera, possibly to an aide. ‘Well, I think what this is is the beauty of the blockchain, right, so you don’t have to … like, where’s the Bitcoin office, because Bitcoin doesn’t have an office.’”
“No one knows exactly where Binance is headquartered or where its officers may be found,” the Davillier lawyers told Brnovich. “The individual defendants have gone to ground and are international ‘ghosts.’”
Plaintiffs’ lawyers asked the judge to allow them to serve Zhao, He and Lin by Twitter. All three have verified Twitter accounts, the Nov. 15 motion said, and all appear to check their accounts regularly. Federal courts are increasingly comfortable with service via social media, the brief said, as long as it’s allowed by international treaties.
But that is precisely the problem with using Twitter to serve a defendant whose whereabouts are unknown, Brnovich said in a Dec. 14 opinion denying plaintiffs’ motion for alternative service. Zhao, for instance, might be in Taiwan or Singapore. Plaintiffs could serve him via Twitter if he is in Taiwan, which has not joined the Hague Convention, Brnovich said — but not if he’s in Singapore, which is a Hague Convention signatory. Without knowing which country Zhao and his colleagues are in, the judge concluded, she can’t determine whether service via Twitter would violate international law.
The judge acknowledged other cases in which courts have authorized social media service. In 2013, a New York federal district judge granted the Federal Trade Commission’s motion to serve robocall defendants in India via Facebook. In 2014, a federal district judge in Virginia ruled that the networking app WhosHere, Inc, could serve a Turkish defendant via messages on Facebook and LinkedIn. And in 2016, a federal magistrate judge in San Francisco allowed the non-profit St. Francis Assisi to use Twitter to serve a Kuwaiti national accused of financing a terrorism operation.
But in all of those cases, Brnovich wrote in Tuesday’s opinion, plaintiffs knew the defendants’ country of residence. Judges evaluating plaintiffs’ motions for alternative service could determine whether defendants’ home countries allowed the use of notice via social media.
“Unlike those cases, here, defendants are alleged to be Chinese nationals with potential residences in a number of countries, including Taiwan, Singapore, Malta, or the United States — to name a few,” the judge wrote. “The court can only speculate as to whether service by Twitter is prohibited by international agreement as the country of residency cannot be identified.”
I reached out to Zhao, He and Lin — on Twitter, naturally — but didn’t hear back. Goodwin Proctor, which represents the corporate defendants, didn’t respond to an email query on plaintiffs’ allegations that Binance has moved headquarters to evade regulators.
Plaintiffs’ lawyer Wendt of Davillier said he understood why the judge denied his motion, though he said it’s frustrating that the law takes a while to catch up to technology. “Zhao is intentionally hiding where he is,” Wendt said. “Binance says they exist in the cloud. It would seem that service in the cloud would be appropriate.”
On Thursday, Brnovich granted plaintiffs’ request for a 60-day extension of the deadline to serve Zhao, He and Lin with the class complaint. “We will find them and we will nail them,” Wendt said. “There has to be a way for us to overcome.”
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