TL;DR
- The US Supreme Court has declined to hear Binance’s appeal regarding a class-action lawsuit alleging the illegal sale of unregistered tokens, allowing the lawsuit to proceed.
- The lawsuit, initiated by investor Chase Williams, claims Binance operated as an unregistered securities exchange or broker-dealer by selling unregistered tokens to US investors.
- Binance’s legal challenges have intensified, including a $4.3 billion settlement with the US Department of Justice and ongoing lawsuits in Canada and from the FTX bankruptcy estate.
The US Supreme Court has declined to hear an appeal from cryptocurrency exchange Binance and its founder, Changpeng “CZ” Zhao, regarding a class-action lawsuit filed by investors. The lawsuit alleges that Binance illegally sold unregistered tokens that subsequently lost significant value.
On January 13, the Supreme Court denied a petition to review a lower court ruling that US securities laws applied to Binance, despite the exchange not having a physical headquarters in the United States.
Background of the Lawsuit
The class-action lawsuit was initiated by investor Chase Williams in April 2020. Williams and other investors claim that Binance operated as an unregistered securities exchange or broker-dealer by selling unregistered tokens to US investors.
The lower court ruled in March 2024 that the case could proceed because token purchases were finalized in the US and transactions took place on US servers, even though Binance is not an American company.
Binance’s Appeal and Legal Arguments
Binance appealed the lower court’s decision in December 2024, arguing that recent technological innovations have enabled investors to participate in foreign financial markets with greater ease and efficiency.
The exchange contended that this interconnectivity allows Americans to trade on foreign exchanges, and therefore, US securities laws should not apply to its operations. However, the Supreme Court’s refusal to hear the appeal means the class-action lawsuit will now move forward.
Ongoing Legal Challenges
Binance and Zhao’s legal troubles in the US have intensified since mid-2023 when the SEC sued the company and its then-CEO for selling unregistered securities and illegally servicing US citizens.
In November 2023, Binance reached a $4.3 billion settlement with the US Department of Justice for violating money laundering and terrorism financing laws.
Global Legal Issues
Binance’s legal challenges are not confined to the US. In April 2023, the exchange faced a class-action lawsuit in Canada for allegedly violating securities laws after announcing its departure from the country.
Additionally, the FTX bankruptcy estate is suing Binance and Zhao for $1.8 billion over an alleged fraudulent share deal from 2021. In August 2024, Binance and Zhao were hit with another lawsuit for allegedly laundering stolen cryptocurrency.
The Supreme Court’s decision to deny Binance’s petition for review marks a significant development in the ongoing legal battles faced by the world’s largest cryptocurrency exchange.
