Binance and Former CEO CZ Seek Clarification on Stablecoins’ Classification as Securities in Lawsuit Against SEC

Binance and Former CEO CZ Seek Clarity on Stablecoins’ Classification as Securities

In a recent development in the ongoing lawsuit between cryptocurrency exchange Binance and its former CEO Changpeng “CZ” Zhao against the Securities and Exchange Commission (SEC), a notice has been filed to the court to seek clarification on the government’s stance regarding stablecoins’ classification as securities.

Attorneys representing Binance and CZ submitted a notice of supplemental authority to the U.S. District Court for the District of Columbia on April 25. The notice draws attention to the government’s allegations in a criminal case against Avraham Eisenberg, who was convicted of fraud and market manipulation.

Prosecutors in Eisenberg’s case argued that there was “no factual basis” for considering USD Coin (USDC) as a security or bringing the matter before a jury. The Justice Department cited USDC as a security in its case against Eisenberg, which could have implications for the classification of stablecoins in general.

While the government’s stance seems to be specific to USDC, it could potentially impact other stablecoins like Binance’s Binance Coin (BNB) and Binance USD (BUSD), which were mentioned in the SEC’s complaint against the exchange.

The lawsuit against Binance and CZ, filed in June 2023, alleged that the exchange facilitated unregistered sales and offers of BNB and BUSD, as well as other programs like Simple Earn, BNB Vault, and staking.

Although the SEC complaint against Binance is still pending, the exchange and CZ recently reached a $4.3 billion settlement with the US Justice Department, Treasury Department, and Commodity Futures Trading Commission. As part of the agreement, CZ resigned as CEO and pleaded guilty to one count of felonies, with sentencing scheduled for April 30.

In a related development, two Binance executives were arrested in Nigeria amid efforts to halt naira transactions, while authorities in Canada filed a lawsuit alleging the sale of unregistered crypto derivatives.

The outcome of the lawsuit and the government’s stance on stablecoins could have far-reaching implications for the cryptocurrency industry. Stay tuned for further updates on this developing story.

Also Read: Binance Founder Changpeng Zhao Apologizes in Letter to Judge