On Sept. 21, Binance, its US subsidiary Binance.US, and CEO Changpeng Zhao ‘CZ’ filed a joint motion in the US District Court of the Columbia state to dismiss the SEC lawsuit against them. Crypto exchanges and CZ stressed that the SEC had overstepped its authority while filing the lawsuit.
The financial regulator filed the lawsuit on June 5, leveling 13 charges against the crypto platform. It includes allegations of offering unregistered securities and operating illegally in the United States.
Binance Holdings submitted a 60-page petition, and Binance.US filed a 56-page document on the same day.
Attorneys for Binance.US and Binance accused the SEC of not setting clear rules for the crypto industry before suing Binance. Moreover, the SEC is trying to push its authority over the sector, they said.
“The SEC pursues these novel theories retroactively, seeking to impose liability for sales of crypto assets that occurred as far back as July 2017, before the SEC provided any public guidance concerning cryptocurrency.“
The exchange asserted that the time limit for the SEC’s claim regarding Binance’s 2017 initial BNB offering has run out. The SEC’s attempts to apply securities laws to BNB’s offering and Binance’s non-US exchange are patently illegal. The regulator claimed these entities illegally earned $11.6 billion from US customers since 2017.
The SEC’s legal action against Binance and its affiliates came three months after the Commodity Futures Trading Commission (CFTC) lawsuit against. The CFTC accused Binance of unlawful operations in the United States and failure to register with them.
SEC’s Excessive Reach In Cryptocurrency Regulation
Both the exchange and Zhao argued that Congress has been deliberating numerous proposals since 2019 to create a comprehensive regulatory framework for cryptocurrencies and the platforms facilitating their trading. None of these proposals would allow the SEC to regulate the crypto industry exclusively.
Therefore, they believe that the SEC is going too far in trying to regulate the cryptocurrency sector.
Ongoing regulatory problems affected Binance.US severely. Since September last year, the company has witnessed a more than 60% drop in daily trading volumes. Earlier this month, a judge granted the SEC’s request to unseal documents in its lawsuit against the exchange.
Moreover, the exchange reduced its workforce by 30%. Its CEO and president, Brian Shroder, also resigned on September 13. Reportedly, over 10 executives from various departments of the exchange resigned this year.