A pivotal hearing unfolded in a Washington DC federal courtroom today (Monday), as Binance faced intense scrutiny from Federal Judge Amy Berman Jackson. Lawyers for Binance were pressed to defend their request for the dismissal of a high-profile lawsuit brought against the exchange by the US Securities and Exchange Commission (SEC).
Binance Argues Lack of SEC Authority in Core Legal Challenge
Binance has sought to have the SEC's lawsuit tossed out, a legal battle representing one of the last major challenges for the cryptocurrency exchange in the United States. The SEC, in June of the previous year, accused Binance, its then-CEO Changpeng Zhao, and the exchange's US arm of multiple infractions, including artificially inflating trading volumes, diverting customer funds, failing to restrict US customers, and providing misleading information about market surveillance controls.
At the heart of Monday's hearing was a core argument put forth by Binance's legal team that the SEC lacks the authority to regulate the crypto assets in question because they do not meet the definition of an investment contract. The Securities Act of 1933 provides a definition of the term "security", with a crucial legal test relying on a US Supreme Court case. This test evaluates whether individuals are contracting to invest in a common enterprise with the expectation of profit.
Binance kicks off oral arguments in push to end SEC lawsuit https://t.co/56YO2nCFfa pic.twitter.com/rK1J72z8vw
— Reuters (@Reuters) January 22, 2024
Allegations Against Binance and Coinbase
Judge Jackson pressed Binance's lawyers on how their argument aligns with the assertion that the crypto sector requires new regulation, considering existing case law indicating that securities laws are designed to be flexible to protect investors. The courtroom engagement marked the second high-profile battle in recent days where the SEC had to defend its regulatory authority over the crypto sector. In a similar vein, Coinbase and the SEC clashed last week on comparable issues.
Notably, the SEC's case against Binancediffers from its dispute with Coinbase, as it includes additional allegations of fraud and market manipulation. In the preceding year, Binance had agreed to a substantial $4.3 billion settlement with the Department of Justice and the Commodity Futures Trading Commission over illicit finance breaches. Zhao had pleaded guilty to breaking US anti-money laundering laws and stepped down as the CEO as part of the settlement. However, the SEC's case continues to loom over the exchange.
This article was written by Tareq Sikder at www.financemagnates.com.
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