Binance and CEO CZ face $1B lawsuit for promoting unregistered securities
In the midst of facing a lawsuit from the United States Commodity Futures Trading Commission (CFTC) for alleged trading violations, Binance, the world's largest cryptocurrency exchange, and CEO Changpeng ‘CZ’ Zhao have been sued again.
This time, a lawsuit of $1 billion was filed against Binance, CZ, and three crypto influencers for promoting unregistered securities.
The Moscowitz Law Firm and Boies Schiller Flexner filed the lawsuit in the Southern District of Florida on March 31, claiming that Binance had been trading unregistered securities and paying influencers for their unlawful promotion.
The lawsuit claims that Binance and the three influencers, NBA Miami Heat star Jimmy Butler and YouTubers Graham Stephan and Ben Armstrong (BitBoy Crypto), are liable for the damages caused to investors. The lawsuit alleges that Binance is promoting the sale of an unregistered security, which is a classic example of a centralized exchange. While only three American citizens brought the lawsuit, the claim states that “millions” of people could be eligible for damages. The law firm is also planning to add more Binance influencers to the lawsuit in future filings.
The lawsuit claims that promoters and the exchanges that facilitate trades of such assets are liable for customer losses. It also alleges that investors have no obligation to prove they were influenced by the advertisements. While this lawsuit alleges a significant loss to investors, the previous lawsuit against Voyager alleged that influencers promoting unregistered securities are liable for customer losses.
Moreover, Financial Times has reported that CZ and other top Binance executives have been concealing the crypto exchange’s ties to China. The report claims that CZ had reportedly said in a company message group in November 2017 that “We no longer publish our office addresses … people in China can directly say that our office is not in China.”
Binance confirmed to Cointelegraph that the company does not operate in China and has no technology, including servers or data, based in China. The exchange clarified that its 8,000 full-time employees live across Europe, the Americas, the Middle East, Africa, and Asia-Pacific.
The $1 billion lawsuit adds to Binance’s legal challenges as it continues to face scrutiny from regulators worldwide. The crypto industry’s growth has led to increased regulatory attention, and Binance’s size and influence in the industry has made it a particular focus of regulators.