In a widely anticipated ruling, a federal judge has largely upheld the U.S. Securities and Exchange Commission’s (SEC) case against the cryptocurrency exchange Binance and its founder, Changpeng Zhao. However, the judge also dismissed several charges, including the one related to secondary sales of Binance’s native token, BNB.
Bulk of SEC’s Charges Upheld
The federal judge, Amy Berman Jackson, rejected Binance’s attempt to throw out the majority of the SEC’s complaints. The court found that the agency’s arguments were plausible, and it also ruled that Zhao may be personally liable for Binance’s alleged violations given his control over the company.
Dismissal of Secondary Sales Charge
One of the notable victories for Binance was the dismissal of the charge related to secondary sales of BNB. The judge cited a previous decision about the cryptocurrency Ripple, stating that the determination of whether a sale constitutes an investment contract should be based on the specific circumstances surrounding that sale, rather than a blanket statement about all crypto assets.
BUSD and Simple Earn Programs Approved
The court also found that Binance’s BUSD stablecoin and its Simple Earn program did not constitute unregistered investment products, as the SEC had alleged. The judge determined that the description of these offerings and how they were sold did not align with the criteria of the Howey test, which is used to determine whether a transaction represents an investment contract.
Implications for the Crypto Industry
The ruling has been celebrated by legal experts across the crypto industry, as the dismissal of the secondary sales charge is seen as a win for the broader industry. The judge’s emphasis on a case-by-case approach to determining whether crypto assets represent investment contracts is also viewed as a positive development.
Conclusion
While the overall ruling appears damaging to Binance’s prospects in the SEC case, the dismissal of certain charges and the court’s recognition of the need for a nuanced approach to crypto asset classification offer some relief for the exchange and the broader cryptocurrency industry.
