Emily Walker
The US Supreme Court has turned down Binance’s appeal to review a class action lawsuit from 2020 that alleges the exchange violated security laws and failed to safeguard its investors.
Supreme Court Decision Against Binance
On Monday, the US Supreme Court declined Binance and founder Changpeng Zhao’s attempt to dismiss allegations of misconduct regarding the sale of unregistered tokens.
The request aimed to contest the 2nd US Circuit Court of Appeals’ revival of the 2020 case. Binance argued that US securities laws should not apply to it since it operates internationally.
Binance’s appeal referenced the 2010 decision in Morrison v National Australia Bank, which limited the extent to which US laws could be applied overseas. They claimed the 2nd Circuit misinterpreted this ruling by allowing liability to extend across various jurisdictions.
Reports indicate that Binance sees this court decision as reviving a standard previously deemed obsolete by the Supreme Court, relating to the application of domestic laws on international transactions.
Additionally, Binance claimed this case presents a critical global issue regarding when US securities laws are applicable to foreign trading platforms such as Binance.com.
Ultimately, the Justices refused to hear the case, upholding the lower court’s decision to let the lawsuit proceed.
Class Action Lawsuit Moves Forward
In 2020, a group of investors initiated a class action lawsuit against Binance, alleging that the exchange improperly facilitated numerous transactions without disclosing significant risks involved with certain tokens.
The lawsuit contended that Binance breached securities laws by offering unregistered tokens and failed to register as a legitimate exchange or broker-dealer. Investors reported losses from their investments in tokens like ELF, EOS, FUN, ICX, OMG, QSP, and TRX.
In March 2022, US District Judge Andrew Carter dismissed the case, stating the investors had waited too long to sue. He asserted that US securities laws didn’t apply to Binance, even though it utilized servers located in the United States.
However, a revival of the lawsuit occurred in March 2024 when the 2nd US Circuit Court of Appeals ruled, in a unanimous decision, that under certain circumstances, US laws could indeed apply.
The appellate court found that the purchase of tokens was irrevocable once made in the US. Judge Alison Nathan noted that Binance’s reliance on domestic servers supported the application of US securities laws, emphasizing that the exchange often refutes the jurisdiction of other countries’ regulations.
