Amy Berman Jackson, U.S. District Court Judge for the District of Columbia, has dismissed several charges brought by the Securities and Exchange Commission (SEC) against Binance Holdings Limited and its founder Changpeng Zhao (CZ).
The dismissed charges related to the sale of BNB on the secondary market and the Simple Earn program. However, other allegations, related to Binance’s initial token offering and ongoing sales, will continue.
The SEC’s complaint alleges that Binance, CZ, and its affiliates violated the Securities Act of 1933 and the Securities Exchange Act of 1934 by offering and selling crypto assets without registration, operating an exchange platform without proper registration, and making false statements to investors.
Source: CourtListener
The SEC’s allegations cover many different aspects of Binance’s operations, including BNB sales, BNB Vault, staking services, etc.
SEC Lawsuit
The SEC lawsuit, filed on June 6, 2023, alleges that Binance violated 13 federal securities laws. The core of the SEC’s lawsuit is that Binance and its affiliates engaged in unregistered securities offerings and sales. The main allegations include:
- Binance offered and sold BNB without registration.
- Binance offered and sold BUSD without registration.
- Binance’s Simple Earn and BNB Vault programs were sold without registration.
- BAM Trading’s Staking Program was sold without registration.
- Binance operates Binance.com without registering as an exchange.
- Binance operates Binance.com without registering as a broker-dealer.
- Binance operates Binance.com without registering as a clearinghouse.
- Binance and BAM Trading operate Binance.US without registering as an exchange.
- BAM Trading operates Binance.US without registering as a broker.
- Binance and BAM Trading operate Binance.US without registering as a clearing house.
- CZ violated securities laws as the controller of Binance in connection with Binance.com.
- CZ violated securities laws as the controller of Binance and BAM Trading in connection with Binance.US.
- BAM Management and BAM Trading made materially false and misleading statements to investors, engaging in fraudulent conduct.
In response to the charges, BAM Trading and BAM Management filed motions to dismiss, followed by Binance and CZ. The court’s decision to dismiss some charges but allow others to proceed was based on a detailed analysis of the legal standards for securities fraud and registration violations.
Legal reasoning and court analysis
The court’s dismissal of certain allegations depends on several legal principles. To dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6), the complaint must contain a body of facts that allows the court to reasonably infer that the defendant was responsible for the alleged conduct.
In this case, the court found that some of the SEC’s allegations did not contain sufficient detail to meet this standard, particularly those related to secondary market sales of BNB and the Simple Earn program. .
The court also evaluated the SEC’s claims under Rule 9(b), which requires specific allegations of fraud.
This rule is stricter than the general pleading standard, requiring specific details regarding the time, place, and content of the misrepresentation. The court found that the SEC failed to meet this higher standard in several of its complaints.
Still, the court found that other parts of the SEC’s complaint, particularly those relating to the initial token offering and the ongoing BNB sale and other programs, were well-founded. to continue the lawsuit.
These allegations involve legal questions about whether Binance’s activities constituted the sale of unregistered securities.
Itadori
According to Cryptopolitan
