Binance, a popular cryptocurrency exchange, and its former CEO Changpeng “CZ” Zhao have submitted a notice to the court in their case with the United States Securities and Exchange Commission (SEC) to clarify the government’s stance on stablecoins as securities.
In their filing on April 25 in the U.S. District Court for the District of Columbia, Binance and CZ’s lawyers presented a Notice of Supplemental Authority, drawing attention to the U.S. government’s arguments in a criminal case involving Avraham Eisenberg, who exploited Mango Markets. Prosecutors in that case asserted that there was no factual basis to classify USD Coin (USDC), a stablecoin, as a security or present the question to a jury.
The Justice Department’s argument against USDC as a security was used in the Eisenberg case, where he was found guilty of fraud and market manipulation on April 18. If the government claims that a stablecoin falls outside the SEC’s regulatory jurisdiction, it could potentially strengthen Binance’s arguments in the civil case.
It appears that the argument made by the government specifically pertains to USDC, while the SEC’s case against Binance includes Binance Coin (BNB) and Binance USD (BUSD), another stablecoin. The lawsuit, which was filed in June 2023, alleges that Binance and CZ permitted unregistered offers and sales of BNB and BUSD, as well as the operation of Binance’s Simple Earn, BNB Vault, and staking programs.
At the time of writing, Binance’s case with the SEC is still ongoing. However, the exchange and CZ reached a settlement with the U.S. Justice Department, Treasury Department, and Commodity Futures Trading Commission in November 2023, agreeing to pay $4.3 billion. As part of the deal, Zhao resigned as CEO of the cryptocurrency exchange and pleaded guilty to one felony count. He is scheduled to be sentenced on April 30.
Binance continues to face scrutiny from regulators and authorities around the world. In Nigeria, two Binance executives were arrested after the firm announced its intention to halt all transactions involving the local fiat currency, the naira. In Canada, authorities filed a class-action lawsuit against Binance on April 19, accusing the exchange of selling unregistered cryptocurrency derivative products.
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