A class action lawsuit against cryptocurrency exchange Binance, initially dismissed by a district court, has seen a reversal of fortunes as a U.S. appeals court overturned the ruling. The March 8 filing with the U.S. Court of Appeals for the Second Circuit revealed that the court favored investors' claims regarding transparency issues related to Binance's sale of alleged securities. The lawsuit, filed by Chase Williams in April 2020 on behalf of investors, alleges that Binance entered into contracts to sell securities without proper registration as a securities exchange or broker-dealer.
Investors, represented by Williams, have sought damages and the cancellation of contracts with Binance, alleging violations of Section 12(a)(1) of the Securities Act of 1933. They claim that Binance engaged in the promotion, offering, and sale of billions of dollars' worth of crypto-assets, referred to as 'tokens', without registering them as securities. The district court had previously dismissed the lawsuit, citing untimeliness under the relevant statute of limitations.
However, the appeals court sided with the plaintiffs, stating that Binance was indeed subject to domestic securities laws and that the initial filing by investors was timely. This decision marks a significant turn in the legal battle between investors and Binance, providing momentum to the investors' claims regarding transparency and compliance issues.
The legal challenges facing Binance in the United States extend beyond this class action lawsuit. The U.S. Securities and Exchange Commission (SEC) has been pursuing regulatory action against Binance, alleging the sale of unregistered securities and the commingling of customer assets. Despite requests for information about asset custody, the SEC has faced difficulties in obtaining responses from Binance.
In a separate legal matter, Binance reached a $4.3 billion settlement with the U.S. Department of Justice in November 2023 for violations of anti-money laundering and terrorist financing laws. As part of the settlement, Binance's founder and former CEO, Changpeng Zhao, pleaded guilty to money laundering charges and is scheduled for a criminal sentencing hearing in April. These legal battles underscore the challenges faced by Binance in navigating regulatory compliance and addressing investor concerns in the United States.
