Binance CEO Changpeng “CZ” Zhao, along with his cryptocurrency exchange, has jointly filed a motion seeking the dismissal of the lawsuit brought by the United States Securities and Exchange Commission (SEC) against them.
In a filing submitted to the United States District Court on September 21, both Binance Holdings and Zhao asserted that the SEC had exceeded its jurisdiction in its lawsuit against them. The 60-page petition, presented by the legal team representing Binance and Zhao, accused the SEC of failing to provide clear regulatory guidance for the cryptocurrency industry before initiating legal action against the crypto exchange. Consequently, they argued that the SEC was attempting to retroactively impose its regulatory authority over the crypto sector.
The filing stated, “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.”
“It is evident that the SEC’s lawsuit lacks a basis in currently enacted securities laws.”
Furthermore, lawyers for Binance contended that the SEC had fundamentally misinterpreted securities laws and their applicability to cryptocurrency assets. The filing emphasized, “In its pursuit of regulatory control over the crypto industry, the SEC distorts the language of the securities laws.”
In addition to the joint petition from Binance and Zhao, Binance’s American subsidiary, Binance.US, legally known as BAM Trading Services Inc., also submitted a separate 56-page filing on the same day, seeking the dismissal of the charges against it.
The SEC initiated legal action against Binance and its affiliates on June 5, levying a series of charges alleging the offering of unregistered securities and illegal operations within the United States.
This SEC action followed a similar move by the Commodity Futures Trading Commission (CFTC), which had sued Binance three months prior for failure to register with the commission and for non-compliance with several of its regulatory guidelines.
The ongoing regulatory scrutiny has taken a toll on trading activity on Binance.US, with daily trading volumes plummeting by more than 98% since September 2022. On September 13, Binance.US also announced a workforce reduction of 30%, and its president and CEO, Brian Shroder, stepped down from his position.