Binance Fights Back Against SEC Lawsuit – One week following the US Securities and Exchange Commission’s filing of charges against Binance, the leading cryptocurrency exchange in terms of volume submitted multiple motions in the US District Court for the District of Columbia, contesting the lawsuit. “The SEC’s request for a temporary restraining order should be denied for several reasons, but the most important is this: there is no risk to BAM’s customer assets,” Binance attorney Daniel W. Nelson said in a motion signed by multiple lawyers for the exchange.
“Indeed, there is no ‘emergency’ here at all, other than the one manufactured by the SEC for its own purposes, when the alleged securities law violations, according to the SEC, have been going on publicly and openly for years.” The SEC recently took legal action against Binance, Binance.US, and their founder and CEO Changpeng “CZ” Zhao, by filing 13 charges.
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These charges accuse Zhao of violating US securities regulations, such as running unregistered exchanges, broker-dealers, and clearing agencies. Additionally, the SEC claims that Binance.US misrepresented its trading controls and oversight, as well as engaging in the unregistered sale of securities. Furthermore, the SEC alleges that Zhao and Binance were involved in a complex scheme of deceit, which included conflicts of interest, insufficient disclosure, and deliberate attempts to evade the law.
“As alleged, Zhao and Binance misled investors about their risk controls and corrupted trading volumes while actively concealing who was operating the platform, the manipulative trading of its affiliated market maker, and even where and with whom investor funds and crypto assets were custodied,” SEC Chair Gary Gensler said in a statement. “They attempted to evade U.S. securities laws by announcing sham controls that they disregarded behind the scenes so that they could keep high-value U.S. customers on their platforms.”
Binance’s legal team raised concerns about the SEC’s charges by filing over 20 motions and declarations with the court. They questioned the timing of the charges, which coincided with a lawsuit against Coinbase, the largest cryptocurrency in the United States. One key issue raised by Binance’s legal team is the SEC’s failure to address the due process implications and the appropriate authorization of this action by the Commission.
They pointed out that Chairman Gensler had personal interactions with Zhao and Binance during the relevant period, which raises fundamental securities questions. “The SEC alleges that Binance.com has been operating unlawfully since its launch in 2017, including the early years when the SEC says it openly had U.S. users,” Nelson said, asking why the agency would let these platforms (Binance and Binance.US) grow to their current size if they were always illegal.
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“The SEC has eschewed rulemaking in favor of ad-hoc enforcement in violation of the Administrative Procedure Act,” the attorneys said. In the documents, Binance’s attorneys say Binance has been engaging with the SEC since 2021. Still, it wasn’t until February 2023 they learned that they were potential targets of an investigation related to the Binance.US exchange. “This court should not permit the SEC to inflict harm in the United States and worldwide by enacting the drastic relief sought by the SEC on an incomplete record and expedited schedule,” they said.
