Major SEC Case Against Binance and CZ Zhao Moves Forward

Major SEC Case
Major SEC Case Against Binance and CZ Zhao Moves Forward

YEREVAN ( — A significant portion of the Securities and Exchange Commission’s (SEC) lawsuit against Binance and its co-founder Changpeng “CZ” Zhao will continue, following a recent ruling. The lawsuit, filed last year, accused Binance of mishandling customer funds, misleading investors, and violating securities laws.

SEC Charges Binance and Zhao
Source: SEC Press Release, June 5, 2023
SEC Charges Binance and Zhao. Source: SEC Press Release

Defendants sought to dismiss the case, but Judge Amy Berman Jackson ruled late Friday that out of 13 counts, 10 will proceed entirely, and two partially, with one count dismissed.

SEC vs. Binance Court Order
Source: US District Court for the District of Columbia
SEC vs. Binance Court Order. Source: US District Court for the District of Columbia

SEC Dismisses BUSD and BNB Sales Claims, Scrutiny of Binance Continues

The count dismissed pertains to the sales of BUSD, a stablecoin now nearly defunct after regulatory actions. Stablecoins are typically pegged to fiat currencies like the US dollar, backed by cash and bonds. This dismissal narrows the scope of the lawsuit but leaves significant allegations intact.

BUSD Price Volatility Chart
Source: CoinGecko
BUSD Price Volatility Chart. Source: CoinGecko

The ruling also partially dismissed parts of a count regarding the sales of BNB, a token integral to the Binance ecosystem. Specifically, the dismissed portion relates to secondary sales of BNB by parties other than Binance. BNB remains a major player in the crypto market, with a market value of about $87 billion, ranking as the fourth-largest digital asset according to CoinGecko.

Top 8 Cryptocurrencies by Market Cap
Source: CoinGecko
Top 8 Cryptocurrencies by Market Cap Source: CoinGecko

An allegation concerning Binance’s Simple Earn program was also partially dismissed. Simple Earn allows investors to lend tokens and earn interest. However, the core of the count remains, continuing the scrutiny on Binance’s business practices.

Binance’s legal challenges are not new. In November, the exchange faced a landmark $4.3 billion penalty in a plea deal with the Justice Department and US regulators over violations of anti-money laundering and sanctions laws. Following this, Changpeng Zhao was sentenced to four months in jail. The SEC was not part of this plea agreement.

CZ’s Sentencing and Crypto Bullrun Anticipation by Futurist Kwame
CZ’s Sentencing and Crypto Bullrun Anticipation. Source: Futurist Kwame

Gensler Targets Crypto Industry

Under Chair Gary Gensler, the SEC has maintained that most digital tokens are unregistered securities subject to its regulation. Gensler has been vocal about his criticism of crypto exchanges and the digital asset industry for alleged noncompliance with securities laws. Despite numerous SEC lawsuits, the question of whether digital tokens are securities remains unresolved, with clarifying legislation from Congress still pending.

Adding to the SEC’s regulatory approach, the agency recently accused Consensys Software Inc. of failing to register as a brokerage and improperly collecting millions in fees. Consensys has disputed these claims, reflecting the ongoing tension between the SEC and the crypto industry.

The ongoing case, presided over by Judge Jackson, is officially titled SEC v. Binance, 23-cv-01599, in the US District Court for the District of Columbia.

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