On Thursday, September 21, 2023, Binance Holdings and its CEO, Changpeng Zhao (CZ), submitted a motion to dismiss the lawsuit initiated by the U.S. Securities and Exchange Commission (SEC). The filing, made to the U.S. District Court for the District of Columbia, contends that the SEC had overstepped its jurisdiction in the case. The filing argues that the regulatory agency didn't offer clear cryptocurrency sector guidelines, making their legal action unwarranted.
The SEC has altered its long-standing laissez-faire stance on the crypto industry, initiating a lawsuit against Binance Holdings Limited (BHL) and its CEO, Changpeng Zhao (CZ), over allegations of violating registration requirements under federal securities laws. The lawsuit challenges the SEC’s sudden assertion of authority over crypto assets, contending it lacks a foundational basis in current law, extends extraterritorially against precedents, and fails to provide prior fair notice or public guidance on its regulatory interpretations.
A specific focus is on BHL's tokens like BNB and BUSD and their related products. BHL rebuts the SEC’s application of the "investment contract" concept from the Howey decision, emphasizing the absence of alleged post-sale obligations. The claims related to BNB’s Initial Coin Offering are argued to be time-barred, and the complaint is said to inadequately establish jurisdiction over CZ.
The lawsuit emerges amidst ongoing Congressional debates on crafting a coherent regulatory framework for crypto assets, none of which designates the SEC as the sole regulatory authority.
Binance's motion argues the court should dismiss the SEC’s claims against BHL and CZ due to multiple legal shortcomings. The company says most claims should be rejected as the SEC hasn’t convincingly argued that the concerned crypto assets are securities. The claims are either time-barred, impermissibly extraterritorial, violate fair notice doctrine, or lack jurisdictional grounds, especially regarding CZ, who doesn’t reside or work in the U.S.
This filing comes after the SEC charged Binance with violating securities laws in early June 2023, claiming the exchange was operating in the U.S. unlawfully. Despite public denials, the SEC accused Binance and Zhao of deceiving investors by secretly permitting high-value U.S. customers to trade on Binance.com and claimed that Binance.US, initially presented as independent, was controlled by Binance and Zhao. The lawsuit also alleged that defendants controlled customer assets, mixed funds, engaged in manipulative trading, and conducted unregistered national securities exchanges, broker-dealers, clearing agencies, and offerings.
