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Class-Action Lawsuit Against Binance Gets Second Wind: Appeals Court Rejects Prior Dismissal

Appeals court revives the Binance lawsuit 

The United States appeals court has cast aside a prior decision to dismiss a class-action lawsuit against the prominent cryptocurrency exchange, Binance, branding the original rationale as flawed. This pivotal ruling, detailed in a March 8 filing by the United States Court of Appeals for the Second Circuit, rejuvenates the investors' claims against Binance regarding transparency issues in its sale of what are alleged to be unregistered securities.

The court filing stated:

"We hold that each of the district court’s bases for dismissing Plaintiffs’ claims that are before us on appeal was erroneous," 

Initiated in April 2020 by investor Chase Williams, the lawsuit represents a group of investors challenging Binance’s practices. They accuse the exchange of offering securities without proper registration as a securities exchange or broker-dealer, seeking both reparation and the annulment of the contracts entered into with Binance.

This legal reevaluation underscores a broader scrutiny of cryptocurrency exchanges and their adherence to securities law, placing Binance under a magnifying glass as it navigates its operational boundaries within the U.S. legal framework.

Binance faces continuous legal challenges in the U.S.

Amidst ongoing challenges, the cryptocurrency giant finds itself grappling with the Securities and Exchange Commission (SEC) over concerns related to the custody of customer assets. In a notable development on March 6, reports emerged suggesting the SEC's hesitance or inability to provide requested information about the safeguarding of these assets.

This is not the first time Binance has been under the regulatory microscope. In June 2023, the SEC brought forth allegations against Binance, Binance.US, and Changpeng “CZ” Zhao, its founder and former CEO. The charges included the sale of unregistered securities and the improper mingling of customer funds with those of a separate entity controlled by Zhao.

Further complicating Binance's legal standing, a November 2023 settlement with the U.S. Department of Justice saw the company conceding to violations of anti-money laundering and counter-terrorism financing laws. The agreement, which included a $4.3 billion penalty, underscored the severity of Binance's regulatory infractions. Additionally, Zhao's guilty plea to money laundering charges sets the stage for his upcoming sentencing in April.