Binance, CZ file motion to dismiss SEC’s amended complaint
Secondary market resales of crypto assets long after they were first distributed by their developers are not “securities” transactions, lawyers for Binance and its former CEO argued.
Binance continues its battle against the United States securities regulator amid allegations of violations related to certain cryptocurrencies.
Legal defense for Binance and its former CEO Changpeng “CZ” Zhao has filed a motion to dismiss an amended complaint by the US Securities and Exchange Commission.
In the motion filed on Nov. 4, lawyers for Binance and CZ asked the court to dismiss the SEC’s latest lawsuit update targeting additional tokens such as Axie Infinity Shards AXS $4.39.
Filed in September, the SEC’s amended complaint also targets Filecoin FIL $3.34, Cosmos’ ATOM ATOM $4.07, The Sandbox’s SAND SAND $0.233 and Decentraland’s MANA MANA $0.2697 tokens.
SEC’s amended claims “fail as a matter of law”
In the latest motion, Binance’s legal team argues that the court correctly rejected the SEC’s initial attempt to conflate crypto assets with investment contracts.
By doing so, the court acknowledged that crypto assets can be sold as part of an investment contract and that each transaction must independently satisfy securities laws.
According to the lawyers, the SEC’s amended complaint “pays lip service” to the court’s ruling that “crypto assets are not in and of themselves are ‘securities,’” but at the same time refuses to accept the following logical conclusion of that ruling:
“Secondary market resales of the assets long after they were first distributed by their developers are not ‘securities’ transactions.”
Instead, the SEC insisted that almost all transactions involving crypto assets — including blind secondary market resales of tokens — are securities transactions because some buyers might expect the assets to increase in value, the lawyers noted.
What are blind transactions?
In its amended complaint, the SEC clarified that its claims do not concern Binance’s BNB BNB $561.13 token initial coin offering, where buyers allegedly knew they were purchasing BNB from Binance Holdings.
Instead, the SEC alleged that Binance Holdings sold BNB in blind transactions on the Binance and Binance.US exchanges to buyers who did not know they were purchasing tokens from BHL.
In the crypto industry, blind transactions refer to asset transfers that do not provide full information about their contents. According to Coinbase, blind signing is prevalent in the industry due to the intricacy of smart contracts and the limitations of crypto wallets in displaying these details.
The SEC made similar claims about XRP XRP$0.5084 sales by Ripple executives. In a July 2023 decision, US District Judge Analisa Torres ruled some digital token sales by Ripple did not violate the law as alleged by the SEC.
Those sales were “blind bid or ask transactions,” the judge said, in which buyers “could not have known if their payments of the money went to Ripple or any other seller of XRP.”
The latest developments in the SEC’s case against Binance represent another milestone in more than a year of legal battle since the SEC sued Binance in June 2023.
Binance’s founder, CZ, finished a four-month term in a US federal prison in late September after pleading guilty to criminal charges related to violating US Anti-Money Laundering laws. #Write2Earn
