The ruling in a recent case involving Binance, a cryptocurrency exchange, was reversed by an appeals court.
Reviving a case against Binance, the biggest cryptocurrency exchange in the world, and its former CEO Changpeng Zhao and other officials, a recent judgment by the Second Circuit Court of Appeals reversed a lower court verdict. A number of cryptocurrency investors filed a lawsuit against Binance in April 2020, claiming that they bought EOS, TRX, ELF, FUN, ICX, OMG, and QSP, among other ERC-20 tokens.
Judge Andrew Carter of the Southern District rejected the complaint in May 2022, which was a setback for the case. The two main reasons Judge Carter gave for his judgment were the parties’ failure to submit their action within the allotted time and Binance’s lack of domestic links, making it exempt from federal securities laws despite being a non-domestic exchange.
The case had seemed hopeless until a recent judgment by the Second Circuit Court of Appeals reversed Judge Carter’s decision and sent it back to the district court, giving it fresh momentum. Since the plaintiffs had used a U.S.-based browser to visit Binance and since the assets at issue were transacted on U.S. servers, the appeals court agreed with them.
The court also questioned Binance’s claims that it does not have a central office or other physical location. In deciding when the clock started ticking on the statute of limitations, the circuit court held that it had to be within a year after the plaintiffs bought the tokens before it could start ticking. Importantly, the latest verdict only included seven tokens, but the first lawsuit had more.
This decision is noteworthy because it clarifies that the secondary market trading of digital assets that are purportedly securities is subject to U.S. federal securities regulations. K&L Gates partner Drew Hinkes stressed how significant this decision is for providing clarity. Remember that the decision doesn’t say anything about whether or not the tokens are securities.
The parties will have another chance to argue about whether the tokens qualify as securities if the case goes on without further appeal and goes back to the district court. In light of the verdict, Selendy’s partner and plaintiffs’ attorney, Jordan Goldstein, voiced his delight with the outcome and his preparedness to continue pursuing the class action lawsuit against Binance and its founder, Changpeng Zhao.
The lawsuit lodged against Binance has been reinstated in the district court thanks to a recent ruling from the Second Circuit Court of Appeals. This decision clarifies the role of federal securities laws in the United States with respect to digital asset transactions and establishes a precedent for future legal efforts to determine the tokens’ categorization.
Also Read: U.S. bank security is a huge source of confidence for Jerome Powell March 10, 2024
Wallets