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Binance Hit With Reversal: US Investors Get Another Shot at Fraud Claims

Last Updated March 11, 2024 9:33 AM
Teuta Franjkovic
Last Updated March 11, 2024 9:33 AM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • The US Court of Appeals overturned a lower court ruling, allowing US users to challenge Binance in court again.
  • Users claim Binance violated US securities laws by selling them certain cryptocurrencies.
  • The Court of Appeals found the lower court dismissed the case too early regarding US law application.

The United States Court of Appeals has overturned  a lower court’s rejection of a damages claim brought by American users against crypto exchange Binance.

This development allows the affected users another chance to show that their claims should not be regarded as an “impermissible extraterritorial application” of US securities laws.

Binance Lawsuit Back On: US Users Challenge

The  Court of Appeals has given new life to a lawsuit by American residents seeking to nullify contracts made with Binance, citing Section 29(b) of the Securities and Exchange Act of 1934.

Court documents  reveal the plaintiffs’ grievances arise from their Binance investments in a range of cryptocurrencies. These include EOS, TRX, ELF, FUN, ICX, OMG, and QSP. The users allege the exchange breached federal and securities laws by selling these tokens to Americans. The complainants describe their investments in these tokens as “empty promises”. As a result, they claim, many of them suffered significant losses as the value of these cryptocurrencies plummeted.

Binance Users Win Appeal With Revived US Lawsuit

The dismissal of a lawsuit  by a US District Court on March 31, 2022, was based on both the “untimeliness” of plaintiffs’ claims and the deemed “illegal” application of the law. After that, aggrieved Binance users sought recourse at the Court of Appeals.

The plaintiffs, initially sought legal redress for grievances associated with their transactions on Binance. However, they faced a setback when the lower court ruled against them.

However, in a significant turn of events , the Court of Appeals has now determined that the transactions conducted by Binance’s US-based users do indeed qualify as domestic transactions, breathing new life into the case.

Appeals Court Questions Lower Court’s Premature Judgment

According to  the court:

“First, we conclude that [the] Plaintiffs have plausibly alleged that the transactions at issue are domestic transactions subject to domestic securities laws because the parties became bound to the transactions in the United States, and therefore irrevocable liability attached in the United States.”

The Court of Appeals has ruled  that the claims against Binance, even those that emerged a year before filing, were presented within the legally mandated period.

Furthermore, it criticized the lower court’s premature judgment on the lack of connection between the users’ claims and the U.S. states governing the potential class members’ claims. This decision challenges the earlier ruling and opens the door for a more thorough examination of the case’s jurisdictional aspects.

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