- Investors have won an appeal against Binance, reviving a lawsuit alleging the sale of unregistered securities.
- This victory has added to Binance’s woes amidst a separate SEC lawsuit over similar claims.
- Legal battles have piled up for Binance, raising questions about the exchange’s future operations.
A group of investors scored a legal victory against cryptocurrency exchange Binance after a U.S. appeals court overturned a lower court ruling that dismissed their case. The lawsuit accuses Binance of selling billions of dollars worth of unregistered securities in the form of crypto tokens.
Investors Sue Binance
The investors, led by Chase Williams, filed the lawsuit in April 2020. They allege that Binance offered and sold these tokens without being registered as a securities exchange or broker-dealer, which violates federal securities laws. They are seeking damages and to cancel their contracts with Binance.
Sponsored
The initial lawsuit was dismissed by a district court judge who ruled that the claims were filed outside the relevant statute of limitations and that Binance wasn’t subject to U.S. securities laws. However, the appeals court disagreed on both points.
They determined the lawsuit was filed promptly and that Binance’s activities could be considered subject to domestic securities regulations. This win for the investors comes amidst ongoing legal troubles for Binance with the U.S. Securities and Exchange Commission (SEC).
Binance Already in Legal Hot Water
The SEC filed a separate lawsuit against Binance in June 2023, alleging unregistered securities sales and improper handling of customer assets. The SEC has also reportedly faced difficulties obtaining information from Binance regarding customer asset custody.
In November 2023, Binance settled with the U.S. Department of Justice for $4.3 billion, admitting to violating money laundering and terrorism financing laws. Binance founder Changpeng Zhao also pleaded guilty to money laundering charges and awaits sentencing in April.
On the Flipside
- Binance argues the tokens in question are utilities, not securities, and therefore exempt from registration. This is a key point in their defense against the lawsuit’s claims.
- The appeals court decision only allows the case to proceed; it hasn’t ruled on the merits of the investor’s claims. Binance may still prevail in court.
Why This Matters
This appeals court victory empowers investors to hold cryptocurrency exchanges accountable for potentially selling unregistered securities. It sets a precedent that could lead to similar lawsuits against other exchanges, potentially impacting how they operate and offer certain crypto products within the U.S.
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