- Judge Amy Berman Jackson ruled that the SEC reasonably alleged that Binance, Binance.US, and Zhao violated federal securities laws.
- Charges that can continue include those related to the initial coin offering and ongoing sales of BNB, BNB Vault, staking services, failure to register, and fraud.
A federal judge has allowed most of the U.S. Securities and Exchange Commission’s (SEC) case against Binance to proceed, though she dismissed a few key charges. This decision intensifies the scrutiny on one of the world’s largest cryptocurrency exchanges and its founder, Changpeng Zhao, as they navigate through mounting regulatory pressures.
According to a court filing dated Friday, Judge Amy Berman Jackson of the District Court for the District of Columbia ruled that the SEC had convincingly alleged that Binance, Binance.US, and Zhao violated federal securities laws. Specifically, the charges related to the initial coin offering and ongoing sales of BNB, BNB Vault, staking services, failure to register, and fraud can continue.
However, the Judge granted Binance and Zhao’s motion to dismiss charges related to secondary BNB sales and the Simple Earn program. The SEC brought the lawsuit last summer, claiming that Binance and its U.S. affiliate offered unregistered broker, trading, and clearing services for unregistered digital asset securities.
See Related: From Bad To Good To Worse: The Binance And FTX Saga
Judicial Reasoning And Context
Similar charges have been brought against other major crypto entities like Coinbase, Kraken, and recently, Consensys and MetaMask, Coindesk reported. In her ruling, Judge Jackson referenced the differentiation between investment contracts and tokens, aligning with the Supreme Court’s definitions.
She found the SEC’s claims under most of the charges compelling, stating: “The court finds these observations to be clarifying and persuasive, as the differentiation is consistent with the Supreme Court’s earliest pronouncements concerning the meaning of the term investment contract.”
However, Judge Jackson dismissed the SEC’s charges related to secondary BNB sales, citing the economic realities of the transactions, a perspective shared by Judge Analisa Torres in the SEC’s case against Ripple Labs. She also rejected arguments that the SEC’s actions overstepped its authority under the “major questions doctrine,” a Supreme Court precedent requiring explicit congressional direction for federal agencies regulating significant industries.
Zhao is concurrently serving a four-month sentence for a sanctions violation charge brought by the Department of Justice and the Treasury Department, separate from the SEC’s civil case.
