Binance Seeks Dismissal of SEC Fraud Lawsuit in Court
In Brief
Binance is scheduled for a legal battle with the SEC on Friday, requesting to dismiss a lawsuit filed in June.
Cryptocurrency exchange Binance is scheduled for a legal battle with the United States Securities and Exchange Commission (SEC) in a Washington courtroom on Friday. Binance will request a federal judge to dismiss a lawsuit filed against it by the SEC in June.
The regulator alleges that Binance, along with its former chief executive officer and founder Changpeng Zhao, and Binance.US’s operator, engaged in activities such as artificially inflating trading volumes, diverting customer funds, failing to restrict US customers from its platform, and providing misleading information to investors about its market surveillance controls.
Additionally, Binance faces accusations of facilitating the trading of cryptocurrency tokens deemed securities by the SEC. On January 18th, Federal Judge Amy Berman Jackson, presiding over the case mandated a court review to determine the classification of digital assets as securities. Legal representatives for Binance.US have been granted the opportunity to discuss the question of “whether a digital asset remains a security in perpetuity” and to address the SEC’s claims regarding the potential classification of staking as a security.
BAM Trading, the operator of Binance.US, has asserted in court filings that the SEC has not substantiated its case alleging fraud against Binance. Binance, in response, has contended that the SEC lacks the authority to regulate cryptocurrency assets. This argument mirrors the position presented on Wednesday by lawyers representing Coinbase, a rival also aiming to have the case against it dismissed.
Binance Holdings reached a settlement last year, agreeing to pay $4.3 billion to resolve matters with the United States Department of Justice and Commodity Futures Trading Commission.
Changpeng Zhao, pleaded guilty to violating United States laws related to preventing money laundering. However, the SEC’s case, focusing on Binance’s fundamental business model, remains unresolved, casting a regulatory shadow over the company. This case is one among several brought by the regulator against cryptocurrency-related firms in recent years.
SEC Against Cryptocurrency Exchanges
The SEC initially focused on companies involved in selling digital tokens. However, under the leadership of Chair Gary Gensler, the focus has broadened to include firms engaged in trading platforms, clearing activity, and acting as broker-dealers. In response, cryptocurrecy companies contend that the majority of tokens do not align with the SEC’s definition of a security. They argue that industry-specific legislation is necessary for effective regulation.
The new hearing follows a similar event in the SEC’s case against Coinbase, a cryptocurrency exchange platform operator. It’s important to note that Coinbase faced allegations of operating as an unregistered securities exchange and is not confronted with fraud charges.
In June of the previous year, the SEC initiated a legal action against Coinbase, accusing it of functioning as an unregistered exchange, broker, and clearing agency. The SEC alleged that Coinbase facilitated trading of at least 13 tokens that should have been registered as securities.
During court proceedings on Wednesday, Manhattan Federal Judge Katherine Polk Failla questioned Coinbase about the classification of tokens listed on its platform, seeking clarification on whether they could be considered securities. Following an extensive four-hour hearing, the judge refrained from making an immediate decision from the bench, stating that she is still contemplating certain aspects.
In the likely event that the judge denies Coinbase’s request for case dismissal, the proceedings would advance to the discovery phase. The judge’s decision is expected to have significant implications for digital assets, potentially providing clarity on the SEC’s jurisdiction within the sector.
Binance’s upcoming legal battle with the SEC and the unresolved regulatory challenges, coupled with recent developments involving the Coinbase case, underscore the growing significance of regulatory clarity for digital assets.
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Alisa is a reporter for the Metaverse Post. She focuses on investments, AI, metaverse, and everything related to Web3. Alisa has a degree in Business of Art and expertise in Art & Tech. She has developed her passion for journalism through writing for VCs, notable crypto projects, and scientific writing. You can contact her at alisa@mpost.io
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Alisa is a reporter for the Metaverse Post. She focuses on investments, AI, metaverse, and everything related to Web3. Alisa has a degree in Business of Art and expertise in Art & Tech. She has developed her passion for journalism through writing for VCs, notable crypto projects, and scientific writing. You can contact her at alisa@mpost.io
