Binance, the world’s largest cryptocurrency exchange, is intensifying its legal battle against the U.S. Securities and Exchange Commission (SEC) amid allegations of securities violations related to several cryptocurrencies. In a significant move, legal counsel for Binance and its founder, Changpeng “CZ” Zhao, filed a motion on November 4 seeking to dismiss an amended complaint put forth by the SEC. This lawsuit update, originally filed in September, accuses Binance of selling unregistered securities, including tokens like Axie Infinity Shards (AXS), Filecoin (FIL), Cosmos (ATOM), The Sandbox (SAND), and Decentraland (MANA).
SEC’s Claims And Binance’s Defense
The SEC’s amended complaint alleges that Binance engaged in transactions that constitute the sale of securities without proper registration. However, Binance’s legal team argues that these claims “fail as a matter of law.” They point to a prior court ruling that differentiated between crypto assets and traditional investment contracts, asserting that not all crypto transactions inherently qualify as securities transactions.
In their motion, Binance’s lawyers contend that the SEC’s recent allegations do not effectively address the court’s earlier decision, which affirmed that the sale of crypto assets must be evaluated on a transaction-by-transaction basis. The defense claims that the SEC is attempting to expand the definition of securities transactions to include virtually all sales involving crypto assets, including secondary market resales, simply because buyers may anticipate a rise in value.
Understanding Blind Transactions
Central to the SEC’s amended claims is the concept of “blind transactions.” These transactions involve the transfer of assets without providing full disclosure of their nature or origin. The SEC alleges that Binance Holdings engaged in blind transactions on its platforms, meaning buyers were unaware they were purchasing tokens from Binance itself. This tactic mirrors accusations previously leveled against Ripple in its ongoing legal disputes with the SEC.
Interestingly, the SEC clarified that their claims do not pertain to Binance’s initial coin offering (ICO) of BNB, which buyers were aware of at the time of purchase. Instead, the focus is on subsequent transactions where buyers lacked knowledge of the seller’s identity. In the case of Ripple, U.S. District Judge Analisa Torres ruled that some XRP sales did not violate securities law due to the nature of blind transactions, setting a precedent that may influence Binance’s defense.
The Ongoing Legal Saga
These developments mark another chapter in Binance’s protracted legal struggle with the SEC, which began when the regulatory body sued the exchange in June 2023. The case underscores the ongoing scrutiny facing the cryptocurrency industry as regulators seek to impose clearer guidelines and enforcement mechanisms.
CZ’s legal troubles are compounded by his recent imprisonment for charges related to violations of U.S. anti-money laundering laws, which adds another layer of complexity to the situation.
As the legal proceedings continue, the outcome could significantly impact Binance’s operations and the broader regulatory landscape for cryptocurrencies in the United States. The motion to dismiss the SEC’s amended complaint highlights the growing tensions between regulatory bodies and the cryptocurrency sector, where the definition of securities remains a contentious and evolving issue.
With the future of multiple cryptocurrencies hanging in the balance, industry stakeholders are closely monitoring the developments in this high-stakes legal battle.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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