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US Supreme Court Rejects Binance Appeal In Revived Lawsuit

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The US Supreme Court rejected Binance’s request to review a decision that revived a 2020 class action lawsuit accusing the exchange of violating the country’s security laws and failing to protect investors.

US Supreme Court rejects Binance’s appeal

On Monday, the US Supreme Court unacceptable Binance and its founder Changpeng Zhao plead to avoid a class-action lawsuit accusing the cryptocurrency exchange of violating security laws by illegally selling unregistered tokens.

According to reports, the exchange sought to review the decision of the 2nd U.S. Circuit Court of Appeals in Manhattan to revive the 2020 lawsuit and allow the proposed class action to proceed. Binance and Zhao argued that US securities laws should not govern the exchange because it was offshore.

The appeal cited Morrison v National Australia Bank, a 2010 High Court decision that limited the extraterritorial scope of those laws. It claimed that the Second Circuit misapplied the Morrison decision by “allowing liability at multiple stages of securities transactions and in multiple countries.”

Binance's petition for a Writ of Certiorari. Source: US Supreme Court

The report stated that Binance considers this decision to have “essentially revived the standard rejected by the Supreme Court by which local securities laws can be applied if the underlying conduct of the transaction occurred or the transaction has effects in the United States.”

Furthermore, the exchange claimed that its appeal allows the court to “address a question of global importance to financial markets: whether (and if so, when) US securities laws extend to foreign trading platforms like Binance.com.”

However, the justices refused to hear the exchange’s request, reaffirming the lower court’s decision to allow the lawsuit to proceed.

2020 Class Action Suit Moving Forward

In 2020, a group of cryptocurrency investors filed a class-action lawsuit against Binance, arguing that the exchange “illegally engaged in millions of transactions” and failed to warn about the “significant risks” of some of its tokens.

The lawsuit alleged that Binance violated securities law by selling unregistered tokens and “failing to register as an exchange or broker-dealer.” The investor purchased ELF, EOS, FUN, ICX, OMG, QSP and TRX through the cryptocurrency exchange and is said to have faced significant losses from his investments.

In March 2022, US District Judge Andrew Carter dismissed the lawsuit because investors “filed too late.” The judge also argued that local security laws do not apply to Binance because it is not a domestic exchange, regardless of whether it uses “Amazon computer servers and Ethereum blockchain computers in the United States.”

However, the suit was alive In March 2024, after the 2nd U.S. Circuit Court of Appeals in Manhattan said, in a 3-0 decision, that investors plausibly claimed that local securities laws applied.

“The 2nd US Circuit Court of Appeals in Manhattan ruled that local securities laws can apply even though Binance is not a US company because token purchases become irrevocable in the US once investors pay for them,” Reuters reported.

Judge Alison Nathan argued that Binance’s use of local Amazon servers to host its platform supports the decision, as the exchange “strongly denies the applicability of its securities regulatory regime in any other country.”

Binance, BNB, Binance Coin, BNBUSDT

Binance Coin (BNB) trades at $677 in the one-week chart. Source: BNBUSDT on TradingView

Featured image from Unsplash.com, chart from TradingView.com

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