Binance could strengthen its defense against the SEC by referencing a recent case involving Mango Markets exploiter Abraham Eisenberg. In that case, the US government stated that the stablecoin USDC should not be considered a security, as holders do not expect profits based on its value. Binance's defense team argues that this reasoning could prevent classifying MGNO Perpetuals, which are based on the value of USDC, as a security. While the Eisenberg case and Binance's current SEC case involve different offerings, the argument could potentially benefit other defendants facing securities violations, including Coinbase, which was sued by the SEC in a similar case.
Binance Bolsters Defense Against SEC Allegations with Mango Markets Case Precedent
In a strategic maneuver, Binance has invoked a recent legal precedent from the Mango Markets case to buttress its defense against ongoing allegations by the United States Securities and Exchange Commission (SEC).
On April 26, Binance and its affiliated entities filed a government document citing the case against Mango Markets exploiter Abraham Eisenberg, who was convicted by a jury on April 18. Specifically, Binance's defense team highlighted a crucial paragraph in which the US government asserted its stance on the classification of a particular stablecoin, USDC, as a security.
"There is no factual basis for treating USDC as a security," stated Damian Williams, an attorney representing the US government. "Holders of USDC do not expect profits from the token" due to its direct correlation to the US dollar.
This argument effectively negated a potential exception that would have prevented the classification of MGNO Perpetuals, contracts based on the value of USDC, as a mixed swap. The government's position in the Eisenberg case proved instrumental in securing the conviction but may now provide ammunition for defendants facing similar securities violations, including Binance.
However, the relevance of the Mango Markets case in Binance's defense is not without its limitations. The SEC has accused Binance of multiple securities violations, with each case centering on distinct offerings. Moreover, the recent filing pertains solely to the SEC's civil securities suit against Binance Holdings Limited, its former CEO Changpeng Zhao, and associated companies. It does not extend to the criminal case in which Zhao has pleaded guilty and awaits sentencing.
Despite these limitations, the Mango Markets case could still reverberate within the broader cryptocurrency industry. The SEC initiated lawsuits against Coinbase and Binance just days apart in June 2023 and has pursued actions against other exchanges, including Kraken in November 2023. The legal precedent established in the Eisenberg case may influence the outcomes of these ongoing cases.
As Binance navigates the complexities of the SEC's allegations, the Mango Markets case serves as a potential lifeline in its defense strategy. While the legal battles continue to unfold, the invocation of this precedent underscores the evolving nature of cryptocurrency regulation and the potential for industry participants to leverage legal precedents to their advantage.
