US Judge Allows Major Portion of SEC Lawsuit Against Binance and CZ to Proceed
A United States court has ruled against cryptocurrency exchange Binance’s attempt to dismiss the majority of claims leveled against it by the country’s securities regulator, the Securities and Exchange Commission (SEC).
According to the court filing by Judge Amy Berman Jackson on June 28, claims related to Binance’s staking program, the sale of BNB tokens following its initial coin offering, and anti-fraud violations will proceed.
The court also upheld the SEC’s contention that former Binance CEO Changpeng “CZ” Zhao acted as a “control person” and that Binance was obligated to register under the Exchange Act.
Court Ruling Wasn’t a Complete Victory for SEC
However, the ruling wasn’t a complete victory for the SEC.
Judge Jackson decided to dismiss claims relating to BNB secondary market sales and all sales associated with the Binance USD (BUSD) stablecoin.
In her decision, she referred to Judge Analisa Torres’ ruling in the SEC’s case against Ripple as supporting grounds for dismissing the SEC’s claim regarding BNB secondary market sales.
The court’s decision came as a surprise to finance lawyer Scott Johnsson, who described it as a significant setback for the securities regulator.
Fox Business reporter Eleanor Terrett anticipates that lawyers representing Coinbase, Kraken, and Consensys will leverage this opinion to strengthen their positions in their respective litigations.
You can fully expect @coinbase, @krakenfx and @Consensys lawyers to use this opinion to bolster their positions in their own litigations.
And the @SECGov lawyers can no longer argue that the @Ripple ruling was merely an outlier that no other judges agree with. https://t.co/xC4VOtJvOX
— Eleanor Terrett (@EleanorTerrett) June 29, 2024
Judge Jackson also rejected the SEC’s claims concerning Binance’s passive income feature, “Simple Earn.”
A court hearing has been scheduled for July 9 to further address the matter.
The SEC, led by Gary Gensler, filed the lawsuit against Binance in June 2023, alleging that the exchange had offered the sale of unregistered securities and operated illegally within the United States.
Binance and CZ responded by filing a motion to dismiss the lawsuit approximately three months later, arguing that the SEC had exceeded its legal authority.
In addition to the lawsuit, Binance has faced challenges on the regulatory front.
Seven US states, including Alaska, Florida, Maine, and North Carolina, have either revoked or denied Binance the right to renew its money transmitter license.
Furthermore, CZ is currently serving a four-month prison sentence for violating money laundering laws.
Binance Maintains Leading Position
Despite these legal hurdles, Binance continues to hold its position as the world’s largest cryptocurrency exchange, boasting over 200 million users and managing assets totaling $100 billion.
Just two years ago, in 2022, Binance reported a user base of around 130 million.
By 2023, the exchange had added 40 million more users, bringing the total count to 170 million.
Impressively, in the first half of 2024 alone, Binance has already added at least 30 million new users.
In May, the Financial Intelligence Unit of India (FIU-IND) revealed that Binance has successfully registered with the regulatory body, returning to the country after some regulatory hurdles.
Prior to that, the exchange announced that it had obtained a license from Dubai’s regulator, VARA, enabling the platform to cater to retail clients along with qualified and institutional ones.
