U.S. Supreme Court Denies Binance’s Appeal, Clearing Path for Class Action Lawsuit
In a significant legal development, the U.S. Supreme Court has rejected Binance’s petition to avoid a class action lawsuit, marking a pivotal moment for the world’s largest cryptocurrency exchange and its founder, Changpeng Zhao. This decision affirms that U.S. securities laws apply to Binance, despite the platform lacking a physical headquarters.
The Supreme Court’s Decision
On January 13, the Supreme Court upheld a previous ruling from the U.S. Court of Appeals for the Second Circuit, which concluded that Binance is subject to U.S. securities laws due to its operations involving American investors. This stems from allegations that Binance engaged in the illegal sale of unregistered tokens that significantly lost their value, causing substantial financial losses to investors.
The appellate court had determined that transactions made by U.S.-based investors via Binance became irreversible within the United States, necessitating compliance with American securities regulations. It was also noted that U.S. servers facilitated these trades, further tying the exchange to U.S. jurisdiction.
In response, Binance had argued that technological advancements allow for seamless global trading, making it feasible for Americans to use foreign platforms without subjecting them to domestic laws. However, the Supreme Court declined to review this argument, effectively allowing the lawsuit to proceed.
Mounting Legal Troubles
The Supreme Court’s ruling clears the way for a class action lawsuit alleging that Binance failed to disclose significant risks associated with unregistered tokens, violating U.S. securities laws. The lawsuit, originally filed in 2020 by investors who traded on Binance since 2017, seeks compensation for their losses.
This is not the first legal challenge Binance has faced. In 2023, the U.S. Securities and Exchange Commission (SEC) accused the platform of illegally servicing American investors, alleging that Binance facilitated trading of cryptocurrencies that should have been registered as securities.
In November 2023, the platform agreed to a $4.3 billion settlement with the U.S. Department of Justice (DOJ) for violating anti-money laundering (AML) and terrorism financing laws. Separately, Binance exited Canada in 2023 but faced a class action lawsuit and a $4.4 million fine from Canadian authorities for breaching AML regulations.
Adding to the scrutiny, Binance and Zhao are embroiled in a $1.8 billion lawsuit filed by the FTX bankruptcy estate over an alleged fraudulent share deal in 2021. Zhao himself faced legal penalties, serving a four-month prison sentence in April 2024 for failing to enforce adequate AML controls on the exchange.
Implications for the Crypto Industry
The Supreme Court’s decision underscores the growing regulatory challenges for cryptocurrency platforms operating in the U.S. and beyond. As the class action lawsuit moves forward, the case could set a precedent for how global crypto exchanges navigate compliance with domestic securities laws in jurisdictions where they operate.
For Binance, this ruling represents yet another chapter in its ongoing legal battles, raising questions about its operational practices and commitment to regulatory compliance. The outcome of these cases will likely have far-reaching implications for the cryptocurrency industry, shaping how exchanges engage with international markets while adhering to local laws.
Stay tuned for updates as this case unfolds and its potential impact on the future of cryptocurrency trading worldwide.
