Cryptocurrency exchange Binance and former CEO Changpeng “CZ” Zhao have filed notice with the court in its case with the United States Securities and Exchange Commission to establish the government’s position on stablecoins as a security.
In an April 25 filing in U.S. District Court for the District of Columbia, lawyers for Binance and CZ filed a Notice of Supplemental Authority, bringing the court’s attention to the U.S. government’s arguments in its criminal case against Mango Markets exploiter Avraham Eisenberg. In that case, prosecutors argued there was “no factual basis” for treating USD Coin (USDC) as a security or putting the question to a jury.
The Justice Department used the argument against USDC as a security in its case against Eisenberg, who was found guilty of fraud and market manipulation on April 18. Having the government claim that a stablecoin was not a security seemingly under the SEC’s regulatory reach could bolster Binance’s arguments in the civil case.
The scope of the argument seemed limited to USDC, while the SEC’s case against Binance included BNB (BNB) and the stablecoin Binance USD (BUSD). The lawsuit, filed in June 2023, alleged that the crypto exchange and CZ allowed unregistered offers and sales of BNB and BUSD, as well as Binance’s Simple Earn, BNB Vault and staking programs.
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Binance’s case with the SEC was ongoing at the time of publication, but the exchange and CZ settled with the U.S. Justice Department, Treasury Department and Commodity Futures Trading Commission in November 2023 for $4.3 billion. Zhao stepped down as CEO of the crypto exchange and pleaded guilty to one felony count as part of the deal. He is scheduled to be sentenced on April 30.
The crypto exchange remains under scrutiny from regulators and authorities across the globe. Two Binance executives were arrested in Nigeria after the firm said it intended to cease all transactions in the local fiat currency, the naira. Authorities in Canada also filed a class-action lawsuit against Binance on April 19, alleging the exchange sold unregistered crypto derivative products.
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