Investors Given Opportunity to Pursue Class Action Against Binance
A group of investors who wanted to sue cryptocurrency exchange Binance, its former CEO Changpeng Zhao, and other executives have been granted a new chance to pursue their case. The Second Circuit Court of Appeals recently overturned a lower courtโs ruling that dismissed the lawsuit, allowing the putative class action to proceed against the worldโs largest crypto exchange.
The lawsuit was originally filed in April 2020 by a group of crypto investors who claimed they had purchased securities from Binance, including ERC-20 tokens such as EOS, TRX, ELF, FUN, ICX, OMG, and QSP. The investors alleged that Binance had engaged in fraudulent activities and violated federal securities laws.
New Ruling Reverses Dismissal Decision
In May 2022, Judge Andrew Carter of the Southern District of New York dismissed the case, stating that the plaintiffs had filed the lawsuit after the statute of limitations had expired. He also ruled that Binance did not have sufficient ties within the United States to be subject to federal securities laws.
However, the Second Circuit Court of Appeals recently reversed Judge Carterโs decision and sent the case back to the district court. The appeals court found that the plaintiffs had plausibly alleged that the transactions involving the assets in question were conducted on servers within the United States and that they had accessed Binance from the U.S. The ruling also challenged Binanceโs claims of lacking a headquarters or physical location.
The recent ruling only pertains to seven of the tokens mentioned in the original complaint. It does not determine whether these tokens are securities or not. If the case returns to the district court, the parties will have an opportunity to argue whether these tokens meet the definition of securities.
Binance Exits Nigerian Market After Regulatory Scrutiny
On another front, Binance has decided to discontinue all services involving the Nigerian local fiat currency, the Nigerian naira (NGN), after facing regulatory scrutiny. The exchange recently announced that it would suspend NGN withdrawals after March 8.
The Nigerian government has imposed a $10 billion fine on Binance as part of a crackdown on the platform. The government is concerned about the continuous manipulation of the forex market and illicit movement of funds, which they believe have contributed to the weakening of the naira.
Hot Take: Investors Gain Ground Against Binance
A recent ruling by the Second Circuit Court of Appeals has given investors an opportunity to pursue a class action lawsuit against Binance. The lawsuit, originally filed in 2020, alleges that Binance engaged in fraudulent activities and violated federal securities laws. While the case was initially dismissed by a lower court, the appeals court reversed this decision and sent the case back to the district court for further proceedings.
This ruling is significant because it allows investors to continue their pursuit of justice and potentially hold Binance accountable for its actions. It also challenges Binanceโs previous claims about its lack of ties to the United States, as the appeals court found that the plaintiffs had plausibly alleged that transactions involving the assets in question were conducted on servers within the country.
Additionally, Binanceโs decision to exit the Nigerian market after regulatory scrutiny raises questions about its operations and compliance with local regulations. The Nigerian governmentโs crackdown on Binance and other crypto firms stems from concerns over market manipulation and illicit fund movements, which have negatively impacted the countryโs local currency.
Overall, these developments highlight the ongoing legal and regulatory challenges faced by cryptocurrency exchanges like Binance. As the industry continues to evolve, it is crucial for exchanges to prioritize compliance and transparency to maintain the trust of investors and regulators alike.
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