The US Securities and Exchange Commission (SEC) has strongly countered Binance’s attempt to dismiss the lawsuit filed against it. The SEC’s recent filing argues that Binance’s motion lacks a legal foundation, describing the cryptocurrency exchange’s interpretations of federal law and precedents as “distorted” and “tortured.”
The lawsuit, initiated by the SEC in June, charges Binance and Binance.US, along with Binance founder Changpeng “CZ” Zhao, with offering unregistered securities to investors. This legal action followed closely on the heels of a similar lawsuit against Coinbase.
SEC Claims Binance Argument Would Undermine Securities Laws
Binance and Zhao, claiming SEC overreach, sought dismissal, asserting unproven securities law violations.
Read more: Binance vs. Binance.US: A Detailed Comparison
However, the SEC’s latest filing contends that Binance’s arguments would disrupt decades of established legal precedent underpinning US securities laws. The regulator insists that Binance’s proposed “rigid framework” lacks grounding in existing law or case precedent.
Binance’s Chief Compliance Officer crudely but succinctly summed up this case when he admitted that Binance was “operating as a fking unlicensed securities exchange in the USA bro.” He was right. The agency claims Zhao schemed to feign non-operation in the US while profiting from its markets.
Central to the SEC’s lawsuit is the allegation that Binance’s sale of the BNB token during an initial coin offering, and its Binance USD (BUSD) as an investment contract, contravened securities laws. The SEC also argues that Binance’s staking and earn programs violated federal securities regulations.
The agency dismissed Binance’s appeal to the “Major Questions Doctrine,” frequently used by crypto firms in federal litigation. The agency asserted that upholding Congressional authority shouldn’t stop the SEC from enforcing Congress-established laws.
SEC Presents Strong Case Against Binance
In their Memorandum of Law opposing Binance’s motions to dismiss, the SEC presents a strong case against the defendants. The memo alleges Binance acted as an unlicensed US securities exchange, evading regulations and profiting from US markets.
Read more: Binance Review 2023: Is It the Right Crypto Exchange for You?
It outlines Binance’s purported control over the US entities BAM Trading and BAM Management, used to operate the Binance.US Platform. The SEC claims Zhao staged US non-operation, while secretly profiting from its markets.
“Defendants established two crypto asset trading platforms, the Binance.com Platform and the Binance.US Platform, where they have made crypto assets available for trading by investors in the United States and around the world, including at least 12 crypto assets and three investment programs that are offered and sold as investment contracts and, therefore, as securities under the federal securities laws as interpreted by Howey and its progeny,” reads the SEC filling.
The agency’s complaint includes detailed allegations that Binance, through its platforms, offered and sold assets as investment contracts, thus classifying them as securities under federal laws. The regulator emphasizes that Binance and Zhao’s arguments attempt to rewrite the legal framework established by the Howey test, a key precedent in determining what constitutes a security.
The SEC insists defendants’ dismissal motions be denied; the exchange must be accountable under existing securities laws. This legal battle represents a critical juncture in the regulation of cryptocurrency exchanges and their compliance with US securities laws.
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