Binance and CZ file a motion to dismiss SEC’s amended complaint

Just a month after his release, Changpeng Zhao, the former CEO of Binance, is back to arguing with the SEC about securities. Zhao and Binance filed a motion to dismiss an amended complaint by the US SEC yesterday. 

Legal defense for Binance and its former CEO Changpeng “CZ” Zhao has filed a motion to dismiss an amended complaint by the US Securities and Exchange Commission (SEC).

The latest round with Binance is similar to the regulatory wars affecting Ripple and XRP’s token sales—one never-ending legal battle.

Binance’s argument on the amendment complaint

As per today’s reports, Binance’s legal team argued that the court correctly rejected the SEC’s initial attempt to conflate crypto assets with investment contracts. The court acknowledged that crypto assets can be sold as part of an investment contract and that each transaction must independently satisfy securities laws. 

Binance’s lawyers argued that the SEC’s amended claims against Binance “fail as a matter of law” and should be dismissed with prejudice and without leave to amend.

On the other hand, the US SEC filed an amended complaint in September. The SEC disagreed with the court’s ruling that crypto assets are not in and of themselves “securities,” as the court ruled that secondary market resales of the assets long after they were first distributed by their developers are not “securities” transactions.  

The  SEC’s amended complaint urged that virtually all transactions involving crypto assets, including market resales of tokens, are securities transactions because some buyers might hope the assets will increase in value. 

The amendment targets additional tokens such as Axie Infinity Shards, Filecoin, Cosmos’ ATOM, The Sandbox’s SAND, and Decentraland’s MANA tokens. The SEC argued that crypto assets are not, in and of themselves, “securities,” but it refuses to accept the following logical conclusion of that ruling.

The SEC remains crypto’s frenemy

Per the American constitution, the SEC has a responsibility to enforce anti-fraud measures to deter deceptive practices and safeguard the integrity of the crypto market. The SEC also believes that it could implement ways to address investor crypto-related grievances and disputes to boost confidence in these markets. 

The SEC is responsible for regulating many financial laws that could favor the crypto market. However, that has not been the case. Ever since the current SEC Chair, Gary Gensler, took over, the SEC has been on a crypto chokehold mission.

The current case with Binance and CZ is not the first time the SEC has come after a crypto entity. In July 2023, the SEC made similar claims about XRP’s  Ripple, relying on the comments of an SEC director to support its case. The team argued that XRP should not be treated as a security.

The SEC has discouraged many cryptocurrencies and is viewed by many as the enemy. Investors seem to disagree with the SEC as they think it does not want to embrace the new world order. 

Could CZ be back?

It has been barely two months since CZ’s release. The Binance founder finished his four-month term in a US federal prison in late September after pleading guilty to criminal charges related to violating US Anti-Money Laundering laws.

Many who view CZ as a crypto legend seem to be excited to see him back in the game. Others have expressed fears that he may end up in prison again. CZ had stepped down as he claimed to have been so busy over the years, hence his decision to take some rest. However, it looks like he wants to fight for Binance.