In simpler terms, the U.S. Supreme Court has refused to reconsider a previous ruling that brought back a 2020 class-action lawsuit against Binance. This lawsuit alleges that Binance breached securities regulations within the nation and did not adequately safeguard investors.
US Supreme Court Rejects Binance Appeal
On a Monday, the United States Supreme Court declined Binance and its chief, Changpeng Zhao, from evading a group legal action that alleges the cryptocurrency platform breached securities regulations by offering unregistered tokens in an illicit manner.
As an analyst, I’m sharing that we’re observing a move by the exchange to challenge the decision made by the 2nd US Circuit Court of Appeals in Manhattan. This decision pertained to reviving a 2020 lawsuit and allowing a proposed class action to progress. Binance and Zhao, in their argument, contend that the United States securities laws should not apply to the exchange since it operates beyond our borders.
The argument references Morrison v National Australia Bank, a 2010 Supreme Court ruling that restricted the global applicability of certain laws. It argues that the 2nd Circuit incorrectly interpreted the Morrison decision by permitting liability at various stages of securities transactions and in different countries.
According to the report, Binance’s decision can be seen as reinstating a principle that the Supreme Court has previously turned down. This principle suggests that domestic securities laws might apply if the actions leading to a transaction happened or if the transaction impacted the U.S.
Furthermore, the court is being asked to consider a significant issue in international finance: specifically, whether or under what circumstances, U.S. securities regulations apply to overseas trading platforms like Binance.com.
Despite the request, the Justices chose not to intervene in the exchange’s case, upholding the lower court’s verdict that permitted the lawsuit to proceed further.
2020 Class Action To Proceed
2020 saw a collective legal action by cryptocurrency investors aimed at Binance, based on allegations that the platform conducted a multitude of questionable transactions without proper disclosure, while also neglecting to highlight the substantial risks associated with certain of their tokens.
A legal action was brought forward alleging that Binance broke securities regulations by offering unregistered tokens for sale, and also failed to register as a cryptocurrency exchange or broker-dealer. An investor purchased ELF, EOS, FUN, ICX, OMG, QSP, and TRX via this platform, reportedly suffering substantial financial losses due to their investment.
In March 2022, US District Judge Andrew Carter ruled that a lawsuit filed by investors was invalid because they had waited too long. The judge further stated that since Binance is not a domestic exchange, American security laws do not apply to it, even though it may utilize Amazon’s computer servers and Ethereum blockchain computers within the United States.
In March 2024, the lawsuit was reinstated following a ruling from the 2nd US Circuit Court of Appeals in Manhattan. The court, by a unanimous decision of 3-0, concluded that the investors had provided sufficient evidence to suggest that U.S. securities laws were applicable.
According to a report by Reuters, the 2nd U.S. Circuit Court of Appeals based in Manhattan has decided that domestic securities regulations may still apply to Binance, even though it’s not an American company. The reasoning is that when investors in the U.S. make token purchases from Binance, these transactions become final once payment is made, thus falling under U.S. jurisdiction.
In her argument, Judge Alison Nathan pointed out that Binance’s choice to utilize local Amazon servers for its platform reinforced their stance. This is because Binance has a history of asserting that no other nation’s securities regulations apply to them.
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2025-01-13 20:56