Binance and Founder Requests Dismissal of SEC Lawsuit

Defendants in the Binance vs SEC lawsuit which was filed on June 5th have requested that the case be dismissed with prejudice.

Binance, its United States arm, and founder Changpeng ‘CZ’ Zhao who recently resigned as CEO launched this counterattack on the regulator citing that the enforcement action from the SEC failed to allege any investment contract and securities violations plausibly.

SEC Submit New Filing to Court

Markedly, Binance U.S. made a separate filing to the court on this matter. This is a new development that comes after the SEC submitted a “Notice of Supplemental Authority,” to the court on December 8th. The regulator tried to talk the court into accepting a distorted interpretation of the popular Howey Test. 

Also, the SEC boldly declared that any investment with or without an investment contract is under the jurisdiction of securities laws.

Binance found these arguments to be extraneous especially since the regulator has unsuccessfully proved any product including BNB vault, or simple earn as securities. This is an issue of extraterritoriality and over time, this has been a bone of contention in applying U.S. securities laws to global crypto operations. 

Binance Counters SEC’s New Filing

Binance raised certain concerns about the SEC’s reliance on the resolutions that are related to the Bank Secrecy Act citing that this contributes to the misinterpretation of the territorial scope of the federal securities laws. Ultimately, Binance has said that the transaction did not take place on the U.S. ‘soil’, it therefore exceeds the jurisdiction of the SEC.

The cryptocurrency exchange also highlighted the fact that this filing from the agency inappropriately brings new information and arguments at this litigation stage. 

SEC Leverage DOJ’s Lawsuit Against Binance 

The SEC was also said to be leveraging previous dealings with the Department of Justice (DOJ) and FinCEN but at the same time, Binance clarified that it is inconsequential in the present case, especially in the classification of digital assets under the Securities Act and Exchange Act. 

Binance’s reference to the SEC’s relationship with the DOJ may not be far-fetched considering that the regulator began to add some ‘leaves’ to its case with Binance after observing the DOJ’s recent indictment of the exchange. On one hand, the DOJ has requested a $4.3 billion settlement charge from Binance to resolve their ongoing case.