New York City, USA – The 2nd US Circuit Court of Appeals in Manhattan has revived a lawsuit against Binance, the leading global cryptocurrency exchange. The lawsuit alleges that Binance violated US securities laws by selling unregistered tokens, resulting in significant financial losses for investors. The court has categorised token purchases in the US under US securities laws, as they cannot be cancelled once bought. However, Binance contends that these claims are outside the jurisdiction of the United States. This legal battle carries high-stakes implications with global ramifications.
In a recent unanimous 3-0 decision, the appeals court upheld the investors’ claims, asserting that domestic securities laws were indeed applicable. The court reasoned that once investors purchased the tokens, their transactions became irreversible within the United States. Notably, the court emphasized the fact that Binance used domestic Amazon computer servers to host its platform, which played a crucial role in supporting this decision.
The lawsuit specifically focuses on seven tokens – ELF, EOS, FUN, ICX, OMG, QSP, and TRX – bought on Binance from 2017 onwards, which experienced significant drops in value. Investors accuse Binance of failing to warn them about the associated risks and are seeking to recover their initial investments.
Operating outside the United States, Binance argues that US securities rules do not apply to their operations. However, this lawsuit challenges that argument, bringing into question the alleged violations and Binance’s responsibility under US law. Binance cites a 2010 Supreme Court ruling that limits the application of US securities laws outside the country.
As this legal battle unfolds, it is important to note that it is separate from Binance’s recent admission of guilt and the substantial penalties it faces for violating anti-money laundering laws. Binance’s founder, Changpeng Zhao, has admitted to money laundering charges and stepped down as CEO, with sentencing scheduled for April 30. The ongoing case, titled Lee et al v Binance et al, is currently before the 2nd US Circuit Court of Appeals and the US District Court, Southern District of New York.
Outside of the US, Binance is also facing scrutiny from the Central Bank of Nigeria (CBN). The exchange has excluded the Nigerian naira from its peer-to-peer trading platform, which has sparked debates and reports of potential fines. However, Bayo Onanuga, a Special Adviser to the Nigerian President, has officially denied these claims.
This legal twist surrounding Binance has the potential to reshape the cryptocurrency landscape and set an important precedent for future regulatory actions. Investors and industry experts around the world will be closely monitoring the developments of this case, which has global implications for the cryptocurrency market.