Binance Sued by SEC
The U.S. SEC called 12 tokens securities in its lawsuit against Binance, including BNB, SOL, MATIC and ADA.
In a recent lawsuit filed against Binance, the world's largest cryptocurrency exchange, the U.S. Securities and Exchange Commission (SEC) has identified twelve digital currencies as securities. This legal manoeuvre, which alleges that Binance was unlawfully selling unregistered securities, marks a major event in the ongoing scrutiny of digital assets. The SEC has also sued the Coinbase trading platform.
This case arises from Defendants’ blatant disregard of the federal securities laws and the investor and market protections these laws provide. In so doing, Defendants have enriched themselves by billions of U.S. dollars while placing investors’ assets at significant risk.
SECURITIES AND EXCHANGE COMMISSION
The SEC asserts that Binance breached the Securities Act of 1933 by trading digital tokens considered to be investment contracts, as defined by the Howey test. This legal criteria is used to classify whether an asset is a security, based on whether it involves an investment of money in a common enterprise with an expectation of profit from the efforts of others.
Several top cryptocurrencies, including Cardano, Cosmos, Filecoin, Polygon, and Solana, have been named by the SEC as falling within this definition. These tokens, which are among the most widely traded and popular in the crypto market, may now be subjected to increased regulations and stringent disclosure requirements due to the SEC's actions.
The tokens that have been deemed to be securities by the SEC include:
BNB
SOL
ADA
MATIC
FIL
ATOM
SAND
MANA
ALGO
AXS
COTI
The potential ramifications of this lawsuit are profound for the entire crypto industry. Not only could this intensify regulations on these tokens, but it may also pose legal risks or financial losses for investors. Particularly, those holding these tokens could face repercussions if these tokens are delisted from exchanges or declared illegal. As this situation develops, all eyes will be on the outcome of this lawsuit and the future course of regulatory oversight in the cryptocurrency sphere.
The details of the case are available at: https://media.licdn.com/dms/document/media/D4D1FAQGEvt0qGbPCxg/feedshare-document-pdf-analyzed/0/1686020582753
Given how the U.S. SEC has systematically sued crypto exchanges and organizations involved in token sales and ICOs for what it perceives as securities violations, its recent action against Binance and Coinbase should come as no surprise.
Since 2013, the SEC has
issued more than 20 trade suspensions involving false or lack of adequate information by entities promoting with crypto investments
filed more than 120 cases for unregistered sale of securities relating to ICOs, token sales and other similar promotions of crypto investments
ii. also taken action against celebrities like Kim Kardashian and Steven Seagal for promotion crypto investment platforms without disclosing the compensation received by them for promotion from such platforms.
It is apparent, therefore, that absence of specific laws has not prevented the SEC, or, for that matter the US Courts to stretch existing legal provisions and apply them by analogy to crypto investments.
The situation is no different in India. The recent consultation paper by SEBI on regulating fractional ownership platforms gives an insight into how the regulator thinks. The paper suggests compulsory registration of fractional ownership platforms (renamed as micro, small and medium Real Estate Investment Trusts or MSM REITs) with SEBI. The paper also suggests, among others, that the fractional shares will be mandatorily listed on a stock exchange.
In effect, neither the US nor Indian regulators have banned crypto investments outright. They simply want that such investment schemes should be registered, transparent and make the necessary disclosures in order to make everything transparent to an investor enabling him/her to take an informed decision.
Adv. Debasis Nayak
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