Binance, the world’s largest cryptocurrency exchange, has been hit with a $1 billion lawsuit for promoting unregistered securities, alongside its CEO Changpeng “CZ” Zhao and three crypto influencers.
The Moscowitz Law Firm and Boies Schiller Flexner filed the lawsuit in the Southern District of Florida, claiming Binance’s involvement in trading unregistered securities and paying influencers for the unlawful promotion of such services.
CZ allegations of promoting unregistered securities
The lawsuit alleges that Binance, CZ, and three crypto influencers – NBA Miami Heat star Jimmy Butler, and YouTubers Graham Stephan and Ben Armstrong (BitBoy Crypto) – promoted unregistered securities, which have caused damages to investors.
The law firms also allege that investors do not have any obligation to prove that they were influenced by the advertisements. Millions of people could be eligible for damages, according to the lawsuit. The law firm also plans to rope in more Binance influencers to the suit in future filings.
“This is a classic example of a centralized exchange, which is promoting the sale of an unregistered security,” the lawsuit read. The law firm previously sued Voyager, alleging that influencers promoting “unregistered securities” are liable for customer losses. Based on similar claims, Binance and the influencers are challenged with paying $1 billion for the damages caused to investors.
In addition to the lawsuit, a Financial Times report claims that CZ and other top Binance executives have been concealing the crypto exchange’s ties to China.
However, Binance confirmed that the company “does not operate in China nor do we have any technology, including servers or data, based in China.” Binance’s 8,000 full-time employees live across Europe, the Americas, the Middle East, Africa and the Asia-Pacific.
The consequences of the lawsuit
This lawsuit is the latest setback for Binance, which is already facing a lawsuit filed by the United States Commodity Futures Trading Commission (CFTC) for alleged trading violations.
Binance’s former chief compliance officer, Samuel Lim, is also being sued by the CFTC. The regulator alleges that Binance traded in crypto-related derivatives with US-based customers despite not having regulatory permission and despite having said in 2019 that it would no longer serve US customers. The CFTC is seeking punishments including fines and permanent trading bans.
Binance, which has 128 million customers and handles $65bn in daily trades, has commercial partnerships with high-profile figures such as Cristiano Ronaldo, Italy’s Lazio football team, and TikTok megastar Khaby Lame.
The crypto market is valued at $1tn and Binance is a cornerstone of the industry. This lawsuit and the CFTC lawsuit could damage Binance’s reputation and affect its future in the crypto market.
Binance, CZ, and the crypto influencers have not commented on the lawsuit at the time of writing. The $1 billion lawsuit against Binance, CZ, and three crypto influencers is the latest in a series of setbacks for the exchange.
The allegations of promoting unregistered securities and the ongoing lawsuit with the CFTC could significantly damage the platform’s reputation and affect its future in the crypto market.
The industry is still reeling from the collapse of FTX, and these lawsuits could have significant consequences for the market. Binance, CZ, and the crypto influencers have not commented on the lawsuit at the time of writing.
Source: https://www.cryptopolitan.com/cz-binance-sued-for-1b-over-securities-promo/