Binance and its American counterpart Binance.US and CEO Changpeng Zhao have collaboratively lodged a formal court motion seeking the dismissal of the lawsuit initiated against them by the Securities and Exchange Commission (SEC).
In their motion filed on Thursday, the cryptocurrency exchanges and Mr Zhao contended that the SEC had exceeded its regulatory boundaries with the lawsuit. Furthermore, they asserted that the allegations made by the regulatory body did not convincingly establish various securities-related violations. The motion also emphasized the SEC’s attempt to extend its jurisdiction over digital assets.
The motion argued, “Since 2019, Congress has considered more than a dozen proposals to provide a coherent and practical framework for crypto assets and their trading platforms. Importantly, none of these proposals would grant exclusive regulatory authority over the crypto industry to the SEC. Despite this, the SEC is now seeking to expand its authority by filing this lawsuit, asserting claims against Binance Holdings Limited (‘BHL’) and Changpeng Zhao, among others.”
SEC Levels Serious Allegations Against Binance, Prompting Swift Rebuttal
The SEC’s lawsuit includes serious charges against Binance, its US division, and Changpeng Zhao, including allegations of operating an illegal exchange and commingling clients’ funds, which are highly significant accusations. However, Binance responded promptly to these allegations, categorizing them as “simply incorrect” and questioning the jurisdiction of the US securities regulator.
The motion further noted, “The SEC is retroactively pursuing these innovative theories, attempting to impose liability for crypto asset sales dating back to July 2017, before the SEC had issued any public guidance on cryptocurrencies. It is evident that the SEC’s lawsuit lacks a basis in currently enacted securities law.”
The SEC’s legal action came on the heels of a lawsuit brought by the United States Commodity Futures Trading Commission (CFTC) against Binance and its CEO. This CFTC lawsuit alleged failure to register and violations of multiple regulatory directives while underscoring shortcomings in Binance’s compliance framework.
In the wake of the SEC lawsuit, Binance’s global influence suffered a significant setback. Faced with mounting regulatory pressures, the exchange withdrew from several jurisdictions, sharply declining its trading volume. Additionally, Binance’s US arm transitioned to a crypto-only platform, discontinuing support for fiat currencies, and experienced an exodus of top executives, including its CEO. The exchange also carried out layoffs, affecting numerous staff members.