Dismissal of the Class Action Against Binance
United States securities laws say that if a company doesn’t enroll as a broker-dealer or exchanges and sells cryptocurrency tokens that haven’t been approved by the United States SEC, it can’t sell them to people in a class-action lawsuit. According to the Judge, the action against Binance was submitted “too late” and did not fall under domestic legislation.
The initial petition was lodged in the United States District Court for the Southern District of New York by an investment group alleging that they acquired the cryptocurrencies like LEND, EOS, CVC, ELF, SNT, OMG, QSP, ICX, KNC, FUN, and TRX between 2017 and 2018. CVC, BNT, and SMT were removed from the updated lawsuit, which now lists 9 cryptocurrencies.
The investors claimed that the cryptocurrencies had lost a significant value since their acquisition. They pursued reimbursement for the cryptos’ acquisition price and the payments made to Binance in line with their transactions.
Binance and the Issuers did not register the cryptocurrencies as securities, and they did not register Binance as an exchange or broker-dealer with the SEC. It means that Binance and the Issuers did not register the Tokens as securities, and they did not register Binance as an exchange or broker-dealer.” As a result, as required by federal and state assets regulations, investors weren’t warned of the severe risks associated with these transactions.
As a result of the excitement caused by cryptos, Binance is said to have used that excitement to promote the initiatives that use them and make money from the trading fees that come with it. The investors also said they bought the tokens because they thought they would gain from possessing them.
Judgements by Judge Andrew L. Carter
According to Judge Andrew L. Carter’s judgment on 31st March, a year following their purchase of the coins, investors were way overdue to file a lawsuit. They acquired most of the cryptocurrency in 2018, and the initial filing did not occur until April 2020.
The investors contended that because the SEC issued a structure declaring that digital currencies are securities around April 2020, the deadline for filing complaints should’ve begun then. Still, Carter determined that the applicable rules apply when the alleged violation happens, not when it’s discovered.
Judge Carter further stated that local assets rules don’t apply to Binance since it is based in the Cayman Islands and isn’t a local exchange in the United States. Although Binance’s infrastructure is hosted by Amazon Web Services, situated in the United States, this is not sufficient to classify Binance as a local exchange.
Plaintiffs should allege more than simply that they purchased cryptocurrencies while residing in the United States and that ownership moved wholly or partly through servers in California hosting Binance’s website, Carter stated in the appeal.
It isn’t the first time a cryptocurrency exchange has been sued in a class-action case. Coinbase was sued in the same court on 11th March for allegedly functioning as an unlicensed assets exchange. Plaintiffs are making similar claims against Coinbase, claiming that they weren’t advised about the dangers of bitcoin investments. Binance didn’t quickly send a reply to the request Cointelegraph made for a comment.
