Could past mistakes may be catching up with Binance?
Binance is one of several large cryptocurrency firms named in a series of recent class action lawsuits. If the lawsuits go south for this global company, it could end up costing them billions of dollars.
Class action is looking for new members
Roche Cyrulnik Freedman has recently brought eleven class action lawsuits against some of the biggest names in the crypto space, including Binance. To learn more about these cases, Cointelegraph spoke with Kyle Roche of Roche Cyrulnik Freedman, who shared his rationale behind these litigations:
“Growing enthusiasm for Bitcoin spilled over into the market for initial coin offerings (‘ICOs’), which investors flocked to in the hope of finding the next Bitcoin. The cases allege that exchanges and issuers failed to comply with federal and state securities laws.”
He also added the class action is open to new members
“…who purchased any of the tokens or did business on any of the exchanges named as Defendants. We want investors to reach out to us.”
Billions of dollars on the line
According to an anonymous source who is familiar with the matter, there was “a method to the madness”. Apparently, the focus was on “pre-minted” assets, not cryptocurrencies that employ mining:
“Most of these projects [the ones that issued pre-minted tokens] are still pretty centralized”.
The source also cited a statement by director William H. Hinman of the Division of Corporation Finance of the SEC, in which he asserted that Ether (ETH) may not be a security, since it is sufficiently decentralized.
The same source told us that the plaintiffs expect legal wranglings to take 3 to 4 years. Discussing potential monetary damages, they said:
“It’s hard to say, but it could be in the billions of dollars, Binance alone did billions.”
Binance’s past may come back to bite it
Binance currently offers 802 trading pairs, with most of the available assets representing ERC20 or other pre-minted tokens. In 2017, Binance issued its own ERC20 token, BNB. Around the same time, Binance conducted its first Initial Exchange Offering (IEO). They have since established a platform dedicated to this business activity, called Binance Launchpad.
However, Binance only stopped serving U.S. residents in June 2019. Thus, if any of Binance’s previously-available assets are retroactively classified as securities, plaintiffs may still have a realistic chance in court.
Binance Vs. Binance.US
The striking difference in the way Binance.US has approached the U.S. market could potentially play in the plaintiffs’ hands. Binance.US as a U.S. based entity that has no legal affiliation with Binance. As an entity, it needs to be fully compliant with the U.S. federal and state rules and regulations. This is the main reason why Binance.US is still not serving clients in several states.
Furthermore, Binance.US has developed a Digital Asset Risk Assessment Framework. One of the main goals of this framework is legal compliance. Unlike Binance, Binance.US offers only around 30 digital assets to its U.S. customers.
Cointelegraph reached out to every company involved in these cases. Most either did not respond or responded with “no comment” to our inquiries.
The only meaningful response came from a Bibox customer representative:
“We are running the exchange [that] provides crypto trading service and cryptocurrencies are not securities”.
They also added that Bibox is currently working to secure a legal opinion.
Although the slew of class action lawsuits does not represent an immediate danger to Binance, it may pave the way for more litigation and regulatory inquiries into this crypto leviathan in the future. This may eventually lead to the off-shore exchange losing its leadership.