Binance Faces Lawsuit from US Securities Regulator Following Investor Losses
The 2nd US Circuit Court of Appeals in Manhattan has revived a lawsuit against Binance, the world’s leading cryptocurrency exchange. Investors allege that Binance violated US securities laws by selling unregistered tokens, resulting in significant financial losses for them.
Investors argue that Binance’s sale of unregistered tokens directly caused their financial losses. The court supports this claim, categorizing token purchases in the US under US securities laws, as they cannot be reversed once bought. Binance, however, disagrees with this assertion, arguing that these claims fall outside the jurisdiction of the United States.
This legal battle carries high stakes and has implications that reach far beyond the US. The appeals court, in a unanimous decision, upheld the investors’ claims, stating that domestic securities laws are applicable. The court emphasized Binance’s use of domestic Amazon computer servers to host its platform as a crucial factor in reaching this decision.
The lawsuit focuses on seven tokens—ELF, EOS, FUN, ICX, OMG, QSP, and TRX—that were bought on Binance from 2017 onwards, resulting in significant drops in value. Investors accuse Binance of failing to warn them about the associated risks and are seeking to recover their initial investments.
Binance, which operates outside the US, argues that US securities rules do not apply to them. However, this lawsuit challenges that claim and raises questions about Binance’s responsibility and compliance with US law. Binance points to a 2010 Supreme Court ruling that limits the application of US securities laws outside the country.
Binance and its legal team have not yet commented on the matter. Jordan Goldstein, representing the plaintiffs, welcomes the court’s recognition of the strength of their case.
It is important to note that this legal battle is separate from Binance’s recent admission of guilt and substantial penalties for violating anti-money laundering laws. Binance’s founder, Changpeng Zhao, admitted to money laundering charges and stepped down as CEO, with sentencing scheduled for April 30. The ongoing case, titled Lee et al v Binance et al, is currently before the 2nd US Circuit Court of Appeals and the US District Court, Southern District of New York.
In addition to facing legal challenges in the US, Binance is also under scrutiny from the Central Bank of Nigeria (CBN). The exchange has excluded the Nigerian naira from its peer-to-peer trading platform, leading to reports of fines. However, Bayo Onanuga, a Special Adviser to the Nigerian President, officially denies these claims.
Overall, Binance’s legal battles and regulatory scrutiny are attracting global attention, as they have significant implications for crypto regulations worldwide.