Recently, the 2nd US Circuit Court of Appeals in Manhattan resurrected a suit against Binance, the world’s largest cryptocurrency exchange. Unregistered token sales by the platform violated American securities laws, hence, the investors sued Binance for their losses. The court’s unanimous 3-0 decision confirmed this and its position was that once tokens were bought they became subject to US securities laws.
Binance’s revived lawsuit
Circuit Judge Alison Nathan pointed out Binance’s reliance on domestic Amazon servers, indicating US securities regulations should apply. She pointed out Binance’s notorious evasion of regulatory frameworks in other countries. Taking this stance supported the court’s decision allowing investors to sue over purchases made within a year.
The appeals court’s decision which overturned a previous ruling by US District Judge Andrew Carter, reinstated the case under his jurisdiction. Investors who bought seven tokens through Binance between 2017 and 2018 reported significant losses after buying ELF, EOS, FUN, ICX, OMG, QSP, and TRX.
Investing in Binance tokens carries its own risks and investors claimed Binance didn’t warn them enough. As its exchange is outside the US, Binance argued that US securities laws don’t apply to its operations.
This case is not related to Binance’s recent guilty plea pursuant to which it paid $4.3 billion in an international money laundering investigation by federal authorities. In addition, Binance founder Changpeng Zhao pleaded guilty to separate money laundering charges and resigned as CEO, he would be sentenced on April 30th.
Other legal troubles
In February, Binance admitted culpability and was therefore fined more than $4.3 billion for breaking federal laws on anti-money laundering and sanctions as a result of failing to put in place necessary internal controls.
The plea was approved by US District Judge Richard Jones in Seattle, one hour after government suggested modifications to bond of Changpeng Zhao, founder of Binance.
Binance’s November plea agreement ended an investigation lasting years. It emerged that the exchange failed to disclose over 100,000 suspicious transactions linked with terrorism involving Hamas, al Qaeda or ISIS.
Meanwhile, the Central Bank of Nigeria (CBN) has intensified its scrutiny of Binance. Leading the exchange to remove the Nigerian naira from its peer-to-peer (P2P) trading platform. Despite reports suggesting a $10 billion fine imposed on the exchange, Bayo Onanuga, a Special Adviser to the Nigerian President on Information and Strategy, officially denied such claims.
