Cryptocurrency exchange Binance and its former CEO Changpeng “CZ” Zhao have taken legal action in their case with the United States Securities and Exchange Commission (SEC) to clarify the government’s stance on stablecoins as securities. In an April 25 filing in the U.S. District Court for the District of Columbia, Binance and CZ’s lawyers submitted a Notice of Supplemental Authority, drawing attention to the U.S. government’s arguments in a criminal case involving Mango Markets exploiter Avraham Eisenberg.
Prosecutors in the case against Avraham Eisenberg argued that there was no factual basis for treating USD Coin (USDC) as a security. Eisenberg was convicted of fraud and market manipulation on April 18, with the government’s stance on USDC potentially strengthening Binance’s position in its civil case with the SEC.
While the government’s argument in the criminal case pertained specifically to USDC, it could still impact Binance’s defense in the SEC’s lawsuit, which involves Binance Coin (BNB) and the stablecoin Binance USD (BUSD). Filed in June 2023, the SEC’s lawsuit accused Binance and CZ of allowing unregistered offers and sales of BNB and BUSD, along with other programs offered by the exchange.
While the case with the SEC is ongoing, Binance and CZ reached a settlement with the U.S. Justice Department, Treasury Department, and Commodity Futures Trading Commission in November 2023, amounting to $4.3 billion. As part of the settlement, CZ stepped down as CEO and pleaded guilty to one felony count, awaiting sentencing on April 30.
Despite the settlement, Binance remains under regulatory scrutiny worldwide. Two Binance executives were arrested in Nigeria after the exchange announced its intention to halt transactions in the local fiat currency, the naira. Additionally, Canadian authorities filed a class-action lawsuit against Binance on April 19, alleging the sale of unregistered crypto derivative products.
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