US Judge Permits Significant Portion of SEC Lawsuit Against Binance and CZ to Proceed
A recent ruling from a United States court has rejected cryptocurrency exchange Binance’s bid to dismiss most of the charges brought against it by the Securities and Exchange Commission (SEC).
Judge Amy Berman Jackson’s decision, issued on June 28, allows the SEC’s claims related to Binance’s staking program, the sale of BNB tokens post its initial coin offering, and allegations of anti-fraud violations to move forward.
The court also affirmed the SEC’s argument that former Binance CEO Changpeng “CZ” Zhao acted as a “control person” and that Binance was required to register under the Exchange Act.
Not a Complete Win for the SEC
However, the ruling did not favor the SEC entirely. Judge Jackson dismissed claims pertaining to sales in the secondary market of BNB tokens and all transactions involving the Binance USD (BUSD) stablecoin. She cited Judge Analisa Torres’ precedent in the SEC’s Ripple case to support her decision regarding BNB secondary market sales.
The outcome surprised finance lawyer Scott Johnsson, who described it as a significant setback for the SEC. Fox Business reporter Eleanor Terrett predicts that legal representatives for Coinbase, Kraken, and Consensys will use this ruling to bolster their defenses in their ongoing legal battles.
Judge Jackson also rejected the SEC’s allegations concerning Binance’s “Simple Earn” passive income feature.
A hearing is scheduled for July 9 to further deliberate on these matters.
SEC’s Lawsuit Timeline
The SEC, led by Gary Gensler, initiated legal proceedings against Binance in June 2023, accusing the exchange of offering unregistered securities and operating unlawfully within the US. Binance and CZ responded with a motion to dismiss approximately three months later, arguing that the SEC had overstepped its jurisdiction.
Apart from this lawsuit, Binance has encountered regulatory obstacles. Seven US states, including Alaska, Florida, Maine, and North Carolina, have either denied renewal or revoked Binance’s money transmitter license.
CZ’s Current Situation
Meanwhile, CZ is serving a four-month prison sentence for breaching money laundering laws.
Binance’s Continued Leadership
Despite these legal challenges, Binance remains the world’s largest cryptocurrency exchange, boasting a user base exceeding 200 million and managing assets totaling $100 billion. In 2022, Binance reported 130 million users, a number that grew to 170 million by 2023, and has since expanded by another 30 million in the first half of 2024 alone.
Recent Developments
Recently, the Financial Intelligence Unit of India (FIU-IND) confirmed Binance’s successful registration with regulatory authorities, allowing the exchange to resume operations in the country after navigating regulatory hurdles. Additionally, Binance obtained a license from Dubai’s regulatory authority, VARA, enabling it to cater to retail clients alongside qualified and institutional investors.
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