Binance to Face Class Action After US Supreme Court Declines to Hear Appeal
Cryptocurrency exchange Binance and founder Changpeng Zhao are reportedly set to face a class action by investors after a Monday (Jan. 13) decision by the U.S. Supreme Court.
The court declined to hear their appeal of a lower court’s decision to let the lawsuit proceed, Reuters reported Monday.
The suit accuses Binance of illegally selling unregistered tokens that lost much of their value, according to the report. A lower court ruled in March that the proposed class action could continue because while Binance is not a U.S. company, token purchases became irrevocable in the U.S. when investors paid for them.
Investors who bought any of several tokens through Binance alleged that the company failed to warn them about the “significant risks” of the tokens, the report said. Binance countered by saying that U.S. securities laws do not apply to it because the company’s exchange is not located in the country.
In another, separate lawsuit, the bankruptcy estate of crypto exchange FTX sued Binance and Zhao in November for $1.8 billion, accusing them of orchestrating a “fraudulent” share deal with FTX founder and now convicted fraudster Sam Bankman-Fried.
That case centered on a share deal that happened in July 2021, when Binance, Zhao and other executives sold a 20% stake in FTX back to the company for $1.7 billion in crypto. The suit argued that the transaction should not have gone forward.
A Binance spokesperson said at the time: “The claims are meritless, and we will vigorously defend ourselves.”
In another separate lawsuit, Zhao was sentenced to four months in prison in April after he pleaded guilty to charges of enabling money laundering at Binance.
The charges against Zhao included willfully failing to implement an effective anti-money laundering (AML) program as required by the Bank Secrecy Act. He was also accused of allowing Binance to process transactions involving proceeds of unlawful activity, including transactions between Americans and individuals in sanctioned jurisdictions.
Before receiving his sentencing in that case, Zhao told the judge: “I believe the first step of taking responsibility is to fully recognize the mistakes. Here, I failed to implement an adequate anti-money laundering program… I realize now the seriousness of that mistake.”
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