Binance and CZ Counter SEC’s ‘Howey Test’ Failure in Legal Battle

Binance and CZ Counter SEC’s ‘Howey Test’ Failure in Legal Battle

In a legal tango with the regulators, Binance is asserting that a prior $56 million settlement with the DOJ and FinCEN doesn’t relate to the SEC’s allegations against it. Despite badly in the legal scoop, they’re defending against SEC charges claiming they unlawfully offered unregistered securities to U.S. investors.

In a last straw, Binance argued the SEC’s latest brief lacks new evidence, countering the regulator’s stance on securities law violations. This courtroom showdown adds twists to the ongoing legal battle between Binance and the SEC. Let’s get into the depth of the story to understand Binance’s dodging regulatory story. 

Unpacking SEC Accusations

Binance, in response to an SEC filing, has intensified its defense against the regulator’s accusations. The focus revolves around the SEC’s allegations that Binance allowed the trading of unregistered securities. Binance and its U.S. entity challenged the SEC’s legal argument, specifically disputing the application of the “Howey Test,” a benchmark used to define securities. They emphasized that the SEC hadn’t established any investment contracts for U.S. customers involved in cryptocurrency transactions, a crucial factor under the Howey Test.

This countersuit by Binance and its U.S. arm emerges as part of their ongoing effort to dismiss the lawsuit initiated by the SEC back in June. The SEC accused Binance and Binance.US of permitting the public trade of unregistered securities by listing specific cryptocurrencies and offering a staking service.

Additionally, Binance aimed to downplay the significance of its recent settlements with the DOJ and FinCEN about the SEC’s allegations. The company argued that these settlements, focused on different charges related to laws like the Bank Secrecy Act (BSA), didn’t imply violations of securities laws. 

Mitigating the Impact of Settlements

The filings made a case that the DOJ settlements, acknowledging violations of the BSA, shouldn’t necessarily be interpreted as an acknowledgment of breaching securities laws under the SEC’s jurisdiction. Binance and its founder, Changpeng Zhao, emphasized that the specifics of the plea agreements with the DOJ didn’t provide sufficient notice or indication that the assets in question were considered securities under the purview of the Securities Act or the Exchange Act overseen by the SEC. 

SEC Seeks Gains via Other Agencies Notice? Raises Questions!

Binance also called out the SEC’s attempt to bring in new arguments and facts, labeling it as an improper move. Binance boldly accused the SEC of trying to ride on other agencies’ resolutions, hinting at a lack of solid regulatory backing. The big question now is how the SEC plans to back its allegations of Binance operating unregistered national securities exchanges and broker-dealers amidst the proposed changes to US securities laws. This legal showdown is far from over!

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