Paradigm, a research-driven investment firm, has alleged that the United States Securities and Exchange Commission (SEC) has sidestepped regulatory procedures in its lawsuit against Binance.
Paradigm Accuses the US SEC of Bypassing Rules
In a statement by the firm on September 29th, Paradigm accused the SEC of trying to modify existing regulations by leveraging the accusations in its complaint, all without following the established procedure for rulemaking.
As per the report, Paradigm holds a steadfast belief that the SEC is overstepping its regulatory authority and has expressed strong opposition to this approach.
Inadequacies in the SEC’s Use of the Howey Test
According to its amicus brief, Paradigm pointed out that numerous assets are actively marketed, purchased, and traded due to their profit-generating potential. Furthermore, Paradigm raised concerns about the inadequacies in the SEC’s use of the Howey test, a method that the SEC frequently leans on.
In June, the SEC made allegations against Binance and its CEO, Changpeng ‘CZ’ Zhao, accusing them of misleading customers and directing funds towards a separate investment fund owned by Zhao.
SEC’s 136-Page Complaint
Paradigm also emphasized that the SEC has been initiating comparable cases against numerous cryptocurrency exchanges in recent times. It expressed concern that the SEC’s position in these cases “could fundamentally reshape our comprehension of securities law in several critical aspects.“
Paradigm Comes Out in Support of Crypto
It’s worth highlighting that in August, one of the two prominent venture capital firms, Paradigm, notably filed a supporting brief in favor of Coinbase as the cryptocurrency exchange found itself embroiled in a legal battle with the U.S. Securities and Exchange Commission (SEC). In this particular case, the regulatory agency has made similar accusations against the exchange, alleging that it operated without proper registration as an exchange, broker, and clearing agency.