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Binance and Zhao Challenge SEC in New Legal Move

Last Updated December 13, 2023 9:59 AM
Teuta Franjkovic
Last Updated December 13, 2023 9:59 AM

Key Takeaways

  • Binance claims the SEC is unfairly trying to use the DOJ settlement to strengthen its case, arguing it’s irrelevant.
  • The exchange challenges the SEC’s authority to regulate transactions outside the US.
  • The SEC says the DOJ settlement proves Binance operated in the US and backs its lawsuit.

The Binance vs. SEC saga appears to have no straightforward resolution. Binance persists in trying to dismiss the lawsuit filed by the United States Securities and Exchange Commission (SEC)  in June. The SEC’s lawsuit accused Binance and its founder and former CEO, Changpeng Zhao, of violating securities laws. It alleged that the crypto exchange deceived customers and misdirected funds to a separate investment fund owned by Zhao.

Now, Binance Holdings and Zhao have submitted a response  to the SEC notice of supplemental authority regarding the settlement between Binance and the U.S. Department of Justice (DOJ).

Binance Accuses SEC of Improper Procedures in Crypto Lawsuit

The response filed by Binance  to the US District Court for the District of Columbia contends that the SEC is engaging in improper and impermissible procedures. It says the SEC is doing so by trying to introduce the findings of a $4.3 billion guilty plea and settlement agreement with the Department of Justice (DOJ).

The SEC had sought to include these findings to strengthen its case against Binance and its former CEO. Binance argued  the SEC failed to establish the relevance of the DOJ resolutions to any of the SEC’s claims against it and Zhao.

The commission filed charges against Binance on June 5, 2023, accusing the company of 13 violations related to securities laws. One of the charges alleges that Zhao and Binance controlled and commingled customer assets on Binance US.

Rejecting SEC’s Tactics, Claiming Extraterritorial Overreach

In court documents  filed on Tuesday, December 12, Binance asserted that the SEC’s notice did not align with the claims made in the SEC’s original lawsuit filed in June 2023.

It said: “The SEC Notice is an impermissible supplemental brief that identifies no new “authority” and instead attempts to introduce new factual information and arguments. This alone is reason to disregard it.”

The response from Binance Holdings Ltd. (BHL) and Changpeng Zhao delves into extraterritoriality, a contentious point in applying U.S. securities laws to global cryptocurrency operations. They argue that the SEC’s reliance on resolutions related to the Bank Secrecy Act (BSA) misinterprets the territorial scope of securities laws.

BHL contends the transactions in question occurred outside the US, thus falling beyond the jurisdiction of U.S. securities laws. They assert that the SEC’s approach wrongly extends its regulatory reach, attempting to govern transactions and activities that took place beyond U.S. borders.

SEC Leans on Binance’s $4.3 Billion Settlement to Bolster Lawsuit

The SEC claimed  last week that Binance Holdings Ltd.’s $4.3 billion settlement with the Justice Department and other US authorities strengthens its own case against the world’s largest cryptocurrency exchange.

Despite not being a party to the agreement, the SEC argued  the federal court in Washington hearing its case should consider the admissions made by Binance and Zhao, in the November 21 settlement. Binance and Zhao have requested the court to dismiss the SEC’s lawsuit.

Although Binance has settled with several key US authorities, the ongoing lawsuit remains a significant hurdle for the exchange. The outcome of the case could have major implications for Binance’s operations in the US and globally. We will have to see how the SEC responds to Binance’s latest arguments and whether the court ultimately agrees with the exchange’s claims regarding extraterritoriality. Regardless of the short-term outcome, this legal battle is likely to have lasting consequences for the regulatory landscape surrounding cryptocurrencies.

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