(Reuters) – A federal judge ruled late on Friday that the majority of a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against Binance, the world’s largest cryptocurrency exchange, can proceed.
The decision by Judge Amy Berman Jackson of the US District Court for the District of Columbia is a major blow to Binance, which had asked the court to dismiss the SEC’s lawsuit alleging that Binance and its founder and former CEO Changpeng Zhao violated securities laws.
The SEC’s lawsuit against Binance in June 2023 accuses the exchange and Zhao of artificially inflating its trading volumes, diverting customer funds, failing to restrict U.S. customers from its platform and misleading investors about market surveillance controls.
The regulator also accused Binance of illegally facilitating the trading of several tokens that the SEC considers to be unregistered securities.
The ruling adds to the exchange’s woes after Binance agreed in November to pay $4.3 billion to settle with the Justice Department and the Commodity Futures Trading Commission over illicit finance violations.
However, Friday’s ruling represents a partial victory for the broader cryptocurrency sector, as it sided with the previous judge in arguing that the SEC had not made its case that secondary sales of Binance tokens — which are sold by non-Binance sellers on exchanges — are not securities.