A United States court has decided to allow the majority of the claims made by the Securities and Exchange Commission (SEC) against Binance and its former CEO, Changpeng “CZ” Zhao, to move forward. The ruling came on June 28 from Judge Amy Berman Jackson, who upheld several critical accusations related to Binance’s activities.
Key Claims Against Binance to Proceed
Judge Jackson’s ruling supports the SEC’s allegations concerning Binance’s staking program, the sale of BNB tokens following its initial coin offering (ICO), and various anti-fraud violations. Furthermore, the court upheld the SEC’s assertion that Zhao acted as a “control person” and that Binance had an obligation to register under the Exchange Act.
Partial Dismissal of SEC’s Claims
Despite the overall favorable ruling for the SEC, the court did not uphold all the regulator’s claims. Judge Jackson dismissed allegations related to BNB secondary market sales and all sales associated with the Binance USD (BUSD) stablecoin. In her decision, she referenced Judge Analisa Torres’ ruling in the SEC’s case against Ripple, which influenced her dismissal of the SEC’s claim regarding BNB secondary market sales.
Impact and Reactions
The decision to dismiss part of the SEC’s claims was unexpected and viewed as a setback for the securities regulator. Scott Johnsson, a finance lawyer, noted the ruling’s significant implications. Fox Business reporter Eleanor Terrett suggested that this opinion could be used by lawyers for Coinbase, Kraken, and Consensys to strengthen their defense in ongoing litigations.
Additionally, the judge rejected the SEC’s claims about Binance’s “Simple Earn” passive income feature. A hearing is scheduled for July 9 to further address these issues.
Background and Legal Challenges
The SEC, led by Chairman Gary Gensler, filed the lawsuit against Binance in June 2023, alleging that the exchange had engaged in the sale of unregistered securities and operated illegally in the United States. In response, Binance and CZ filed a motion to dismiss the lawsuit, arguing that the SEC had overstepped its legal boundaries.
Beyond this lawsuit, Binance has faced various regulatory challenges. Seven U.S. states, including Alaska, Florida, Maine, and North Carolina, have either revoked or denied Binance the renewal of its money transmitter license. Additionally, CZ is currently serving a four-month prison sentence for violating money laundering laws.
Binance’s Continued Dominance
Despite these legal and regulatory hurdles, Binance remains the world’s largest cryptocurrency exchange. The platform boasts over 200 million users and manages assets totaling $100 billion. The exchange’s user base has seen remarkable growth, with an increase from 130 million users in 2022 to 170 million in 2023, and an additional 30 million users in the first half of 2024 alone.
In May, the Financial Intelligence Unit of India (FIU-IND) announced that Binance had successfully registered with the regulatory body, marking its return to the country after previous regulatory issues. Moreover, Binance recently obtained a license from Dubai’s regulator, VARA, allowing it to serve retail clients along with qualified and institutional ones.
Conclusion
The court’s decision to allow most of the SEC’s claims against Binance and CZ to proceed marks a significant development in the ongoing regulatory scrutiny of the cryptocurrency exchange. While Binance continues to face legal challenges, its dominant position in the global crypto market remains unshaken, supported by continuous growth and strategic regulatory approvals.
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