The U.S. Securities and Exchange Commission’s Response to Binance’s Motion to Dismiss Lawsuit
The U.S. Securities and Exchange Commission (SEC) has filed its response to Binance’s motion to dismiss the regulator’s lawsuit against it. The SEC rejected the various arguments made by Binance, stating that “no court has adopted Defendants’ tortured interpretation of the law. To the contrary, courts have consistently rejected it, and this Court should as well.”
Regulator’s Lawsuit Against Binance
In June, the SEC sued Binance.US, the U.S.-based subsidiary of Binance, and its founder, Changpeng “CZ” Zhao, accusing them of violating securities laws. In September, the exchange, its holding companies, and CZ filed motions to dismiss the suit, accusing the SEC of regulatory overreach and misinterpreting securities law, amongst other things.
Response from the SEC
The SEC opened its 88-page rebuttal, filed with the U.S. District Court for the District of Columbia, in blistering style, suggesting that Binance’s own Chief Compliance Officer had best summed up the case when he admitted in December 2018 that the company was “operating as an unlicensed securities exchange in the USA.”
The SEC argued that a dismissal would “dismantle decades of foundational precedent upon which the nation’s securities laws operate” and, in its place, install a “rigid framework that turns entirely on contract law and the form transactions take, in clear contravention of Congress’ broad, flexible regime.”
Pushback Against Binance’s Accusations
The SEC also pushed back against Binance’s accusation that its lawsuit violated the so-called “Major Questions Doctrine,” a Supreme Court ruling that stated, in “extraordinary” cases involving matters of great “economic and political significance,” federal agencies cannot regulate without specific Congressional authorization.
Similar Cases Against the SEC
In their own lawsuits against the SEC, Ripple Labs and Coinbase, as well as their supporters, have all jumped on this bandwagon as a new stick with which to beat the regulator.
The Case So Far
In June, the SEC sued Binance.US and Zhao, accusing them of 13 violations, including operating unregistered exchanges, broker-dealers, and clearing agencies; misrepresenting trading controls and oversight on the Binance.US platform; and the unregistered offer and sale of securities.
Regulator’s Emergency Application
At the same time, the regulator filed an emergency application seeking to freeze all of Binance.US’ assets, citing concerns that the company could dissipate customer funds to evade any potential legal judgment. However, on June 17, Binance.US and the SEC reached an agreement that avoided the freezing of exchange assets in return for greater transparency and oversight, according to a consent order.
BAM Management and BAM Trading Services’ Protective Order
In August, BAM Management and BAM Trading Services, Binance.US’ holding companies, filed a protective order against the SEC, attempting to limit the regulator’s demands for information and witness depositions in the lead-up to the trial. The SEC countered on September 14 in a court filing alleging that BAM had produced only 220 documents during the discovery process.
Meanwhile, on September 21, Binance and CZ jointly filed a motion to dismiss, stating, “It is clear that the SEC’s lawsuit has no foundation in the currently enacted securities laws.”
The SEC, in its November 7 response, claimed that Howey does not contain any requirement for a “contractual arrangement” and that this was wishful thinking on behalf of Binance and BAM, who “ignore most of the Complaint’s allegations demonstrating that the assets on their platforms are being offered and sold as securities, while attempting to insert new requirements into Howey’s test.”
### News source: coingeek.com