The US SEC dismisses its lawsuit against Zhao, the creator of cryptocurrency behemoth Binance. Here’s why.
The US Securities and Exchange Commission (SEC) voluntarily halted its two-year battle against Changpeng Zhao, the company’s primary shareholder, and cryptocurrency exchange Binance Holdings Ltd. on Thursday. According to a Reuters article, the action suggests that President Donald Trump may change the country’s stance on cryptocurrencies.
Why was Binance sued by the SEC?
According to Reuters, the SEC filed a lawsuit against Binance and Changpeng Zhao, the company’s co-founder, in June 2023, alleging that the exchange had manipulated trading volumes, embezzled client funds, and misled investors about its surveillance measures. Additionally, Binance was charged with illegally enabling the trade of multiple cryptocurrency tokens that, in the opinion of SEC leadership under President Joe Biden, ought to have been registered as securities.
After two years, why did the SEC reject the lawsuit?
According to the SEC, the case’s dismissal was justified “in the exercise of its discretion and as a policy matter,” and it did not represent the agency’s stance on other cryptocurrency lawsuits. According to Reuters, the SEC is unable to restart the case because of the dismissal, which was filed with prejudice.
In February, the regulator and Zhao, a co-founder of Binance, jointly requested a 60-day halt to the litigation. Zhao and the SEC at the time agreed that a halt was necessary in response to then-acting Chairman Mark Uyeda’s creation of a special agency task force to establish crypto regulatory policy. According to Bloomberg, the task force’s efforts may influence the outcome of the lawsuit.
Binance’s response
On social networking site X (previously Twitter), Binance hailed the dismissal as a “huge win for crypto” and praised US President Donald Trump and SEC Chair Paul Atkins “for pushing back against regulation by enforcement.” It was also described as a “landmark moment” by a Binance representative.
Binance is now embroiled in a legal dispute for the second time. In a different case in November 2023, Binance entered a guilty plea and paid a $4.32 billion punishment for using weaknesses in its internal processes to violate federal anti-money laundering and sanctions laws.
After serving a four-month sentence, Zhao was freed from prison last September after entering a guilty plea to anti-money laundering charges. Zhao consented to resign as CEO at that point. The US Treasury Department, US Commodity Futures Trading Commission, and US Department of Justice conducted a multi-year investigation before this conviction.
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