Key takeaways:
- US federal appeals court reopens lawsuit against Binance for alleged violation of US securities laws.
- Investors were allowed to pursue claims on purchases made within a year before the lawsuit, according to the court ruling.
Binance, one of the world’s largest cryptocurrency exchanges, finds itself embroiled in legal battles as a class-action lawsuit led by investors against the exchange gains traction.
Recently, a United States appeals court overturned a ruling that dismissed the lawsuit, allowing investors to pursue claims against Binance.
The investors allege that they were deceived into buying cryptocurrency tokens registered as securities, leading to significant value drops. The lawsuit focuses on seven tokens—ELF, EOS, FUN, ICX, OMG, QSP, and TRX—bought on Binance from 2017 onwards. Investors accuse Binance of failing to warn them about associated risks, seeking to recover their initial investments.
Binance, operating outside the US, has argued that US securities rules don’t apply to its operations. However, the recent ruling by the Second Circuit Court of Appeals has breathed new life into the case by overturning the previous dismissal and remanding it back to the district court
.
The appeals court found merit in the plaintiffs’ argument that transactions involving the assets in question were finalized on servers within the US, and that they had accessed Binance from the US. Additionally, the court challenged Binance’s assertions regarding its lack of headquarters or physical location.
The lawsuit also raises critical issues concerning the jurisdiction and territorial reach of US securities laws in the context of digital assets. While the ruling doesn’t explicitly address whether certain crypto tokens are securities, it underscores the importance of clarifying the applicability of US securities laws to digital asset transactions.
Furthermore, the lawsuit revives at a time when judges seek clarity on whether secondary market trading of digital assets, alleged to be securities, can also have implications. Investors allege that Binance failed to warn them of the “significant risk” in their investment, adding another layer of complexity to the case.
It’s important to note that this lawsuit is separate from Binance’s recent $4.3 billion penalty for violating federal anti-money laundering and sanctions laws. Founder Changpeng Zhao is scheduled for sentencing on April 30.
In conclusion, Binance’s legal challenges highlight the evolving regulatory landscape surrounding cryptocurrencies and the complexities involved in applying traditional securities laws to digital assets. As the lawsuit progresses, it will likely contribute to shaping future regulations and guidelines governing cryptocurrency exchanges and transactions.
