Binance and CEO CZ Seek Dismissal of SEC’s Amended Complaint in Crypto Asset Case

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Binance and CEO CZ Challenge SEC's Amended Complaint in U.S. Court
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Binace Looks to Toss Amended Complaint from SEC

In the latest salvo in the blistering fight between the crypto exchange and the SEC over cryptocurrency regulation in the US, the crypto exchange and its former chief executive Changpeng “CZ” Zhao have filed a motion in court to dismiss the amended complaint filed by the US Securities and Exchange Commission, saying secondary market resales of crypto assets do not comprise a securities transaction.

SEC’s Amended Pleading: A Question of Law

To that, the lawyers for Binance said the court had already denied the SEC’s “effort to paint crypto assets with a broad brush as securities”. The court granted that each transaction with the crypto assets must on its own satisfy the legal definition of a securities transaction.

It is here that the defense contentions disagree with this judgment and continue to prosecute a theory that all transactions, including blind secondary market resales, are securities transactions. Such blind transactions refer to purchases in which neither the buyer nor the seller has any idea who the other party is, sometimes in cases where the tokens are bought on open exchanges.

Secondary Market Resales Not Securities, Binance Argues

The linchpin of Binance’s argument is the court’s prior decision that crypto assets themselves do not, per se, represent securities. As them attorneys interpret this decision, it means secondary market resales-those between unrelated parties long after the assets’ first distribution by the developer-do not constitute a securities transaction.

SEC Takes a Wide View on Securities Law

The SEC has claimed that secondary market sales constitute securities because there is a likelihood that purchasers would expect the values to appreciate. Binance’s legal team pointed out that the SEC took a similar argument in its case against Ripple, wherein Judge Analisa Torres held that certain sales of digital assets-she labeled those transactions “blind bid or ask” transactions-constituted no securities in law because the buyer could not confirm either the source or origin of his or her pay.

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Binance’s Legal Battle Rages On

With this latest motion to dismiss, another turn was taken in the long road of litigation that started when the SEC filed a lawsuit against the exchange back in June 2023. It is the argument of Binance and CZ’s that the amended claims by the SEC “fail as a matter of law” and should be dismissed without leave to amend, stating further modification of the complaint is unnecessary.
What Are Blind Transactions?

In crypto parlance, “blind transactions” are sales of tokens where parties do not have transparency regarding their counterparties. The SEC said its claims do not pertain to Binance’s initial offering of the BNB token in which buyers knew they were buying from Binance. Instead, the SEC says Binance thereafter engaged in “blind” transactions on both the Binance and Binance.US platforms, muddying regulatory distinctions in securities laws.

This, in effect, is a legal standoff between Binance and the SEC that underlines critical questions about how crypto transactions would fit within the current U.S. securities framework and what the regulatory scope is over decentralized digital assets.

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