Binance, the globally dominant cryptocurrency exchange, and its former CEO, Changpeng Zhao (CZ), have fired back at the U.S. Securities and Exchange Commission (SEC), asking the court to dismiss the lawsuit against them with prejudice.
This bold move comes as part of a broader defense strategy that asserts jurisdictional constraints, questions product classifications, and challenges the SEC’s authority over the evolving crypto landscape.
In addition to Binance and Zhao, Binance.US, a subsidiary of Binance, also filed a similar motion independently, arguing that the SEC failed to show that the exchanges’ U.S. customers were engaging in securities law violations and meeting the definition of an “investment contract.
Binance Challenged SEC Claims
As per the recent court filings, Binance, along with CZ, recently challenged the SEC’s interpretation of the Howey Test, a crucial factor in determining whether a transaction qualifies as an investment contract under securities laws.
Meanwhile, the legal representatives of the exchange argue, that the SEC’s claims have no substantial basis, questioning the SEC’s sudden interest in the crypto industry after years of relative inactivity. Therefore, Binance and CZ lawyers request the court to dismiss the SEC’s claims against Binance and CZ with prejudice.
Furthermore, Binance raised concerns about the SEC’s failure to establish personal jurisdiction against Changpeng Zhao and asserted that the SEC provided inadequate notice to warrant dismissal.
On the other hand, Binance.US argued that the SEC did not present evidence supporting the classification of any products as securities. Additionally, the SEC allegedly failed to accuse Binance.US customers and equity investors of any fraudulent activities.
SEC Strikes Back
In response to the dismissal motions, the SEC opposed Binance.US’ request, arguing that the lawsuit’s claims are valid under the Howey Test and rejecting the notion of overreaching to regulate the cryptocurrency industry. The SEC emphasized its commitment to protecting investors under existing securities laws and criticized Binance for characterizing its actions as procedurally improper.
Furthermore, Binance argues the SEC violated procedural rules by attempting to introduce findings of the $4.3 billion guilty plea and settlement agreement with the DOJ into this lawsuit.
The legal dispute continues to unfold, highlighting the jurisdictional and classification disputes between Binance, CZ, and the SEC in the evolving landscape of cryptocurrency regulations.