Binance and its former CEO, Changpeng "CZ" Zhao, have requested clarification from the court regarding the SEC's classification of stablecoins as securities in their ongoing lawsuit. The government's recent allegations in a criminal case against Avraham Eisenberg, who exploited Mango Markets, provide a supplemental authority for Binance's argument that stablecoins may not fall under SEC regulations. The SEC's complaint against Binance includes BNB and Binance USD (BUSD), but the government's assertion in the Eisenberg case pertains specifically to USDC.
Binance and Former CEO Challenge SEC's Stance on Stablecoins in Landmark Lawsuit
Washington, D.C., April 26, 2023 - In a bold move that could reshape the regulatory landscape for cryptocurrency exchanges, Binance and its former CEO Changpeng "CZ" Zhao have filed a notice to the court in their ongoing lawsuit against the Securities and Exchange Commission (SEC). The move seeks clarification on the government's stance regarding the classification of stablecoins as securities.
The notice, filed on April 25 with the U.S. District Court for the District of Columbia, highlights the government's recent allegations in its criminal case against Avraham Eisenberg, the exploiter of Mango Markets. In that case, prosecutors explicitly stated that "there was no factual basis" for classifying the popular stablecoin USD Coin (USDC) as a security. This contradicts the SEC's position that stablecoins like Binance USD (BUSD) and Binance's native token BNB should fall under its jurisdiction.
Binance's attorneys contend that the government's assertion that USDC is not a security under the SEC's purview significantly strengthens their case in the civil lawsuit. While the argument appears to apply specifically to USDC, it nevertheless raises questions about the SEC's broader stance on stablecoins and cryptocurrencies in general.
The SEC lawsuit, filed in June 2023, alleged that CZ and Binance engaged in unregistered sales and offerings of BNB and BUSD, along with the exchange's other products such as Simple Earn, BNB Vault, and staking programs. The complaint remains pending at the time of publication.
However, in a significant development, Binance and CZ reached a $4.3 billion settlement with the U.S. Justice Department, Treasury Department, and Commodity Futures Trading Commission in November 2023. As part of the agreement, Zhao resigned as the exchange's CEO and pleaded guilty to one count of felony. His sentencing is scheduled for April 30.
The notice filed to the court is a bold challenge to the SEC's authority over cryptocurrencies and stablecoins. It has the potential to set a precedent that could shape the future regulation of the industry. Legal experts closely watch the outcome of this case, as it could have far-reaching implications for the cryptocurrency market.
In related news, two Binance executives were arrested in Nigeria amid plans to halt naira transactions, and authorities in Canada have filed a lawsuit alleging the sale of unregistered crypto derivatives. These developments underscore the intensifying scrutiny of cryptocurrency exchanges by global regulators.
