In a recent legal move, the United States Securities and Exchange Commission (SEC) has requested a federal judge to consider the implications of a ruling in its case against Terraform Labs when assessing the ongoing lawsuit against cryptocurrency exchange Binance.
On Jan. 3, the SEC submitted a motion in the U.S. District Court for the District of Columbia, drawing parallels between the Terraform Labs case and its enforcement action against Binance, Binance.US, and their former CEO Changpeng Zhao.
The commission referenced the Dec. 28 judgment in the Terraform Labs case, where Judge Jed Rakoff largely supported the SEC’s position. In that case, Rakoff ruled that certain tokens involved in the alleged fraud qualified as securities under the definition of investment contracts. He particularly focused on the Terraform defendants’ “stablecoin” UST.
The SEC’s recent filing highlighted the relevance of this analysis to Binance’s “stablecoin” BUSD and its related programs, including staking-as-a-service, BNB Vault, and Simple Earn. The commission believes that the Terraform Labs decision provides additional justification for Judge Amy Jackson to reject Binance’s motion to dismiss the case.
Binance and Zhao had previously sought to dismiss the lawsuit in September, arguing that the SEC was retroactively applying its securities standards and overstepping its regulatory authority.
This SEC enforcement action against Binance is one of several initiated by U.S. financial regulators in 2023. It follows a substantial $4.3 billion settlement agreement between Binance and various U.S. regulatory bodies, including the Commodity Futures Trading Commission, the Justice Department, and the Treasury Department, announced in December. In this settlement, Zhao agreed to plead guilty to a felony charge, with sentencing scheduled for February.
Apart from Binance, the SEC has also pursued legal actions against other major crypto platforms like Coinbase, Ripple, and Kraken, alleging the offering of unregistered securities. This pattern of lawsuits underscores the SEC’s heightened scrutiny and regulatory efforts in the cryptocurrency sector.