The United States appeals court has reversed a ruling dismissing a class-action lawsuit spearheaded by investors against the Binance exchange.

The decision, disclosed in a filing on Mar. 8 with the United States Court of Appeals for the Second Circuit, marks a victory for investors. The appeals court overturned a district court’s dismissal of claims regarding transparency issues in Binance’s alleged sale of securities.

Court Filing

Chase Williams filed the case in April 2020 on behalf of investors who said that Binance sold securities without being properly registered as a securities exchange or broker-dealer. Williams and others want to get out of contracts they made with Binance.

The district court previously threw out the case because the investors’ claims were filed too late, according to the relevant statutes of limitations. The appeals court agrees with the plaintiffs that Binance must follow domestic securities rules and that their first filing was made within the time limit.

Binance Faces Legal Woes Amid SEC Scrutiny

At the same time, Binance is facing many legal problems from U.S. regulators. On Mar. 6, the U.S. Securities and Exchange Commission (SEC) was criticized for not responding to calls for information about where customer assets were kept.

As of June 2023, the SEC had sued Binance, its U.S. branch Binance.US, and its founder Changpeng “CZ” Zhao, saying they sold unregistered securities and mixed customer assets in a different business that Zhao ran. 

Subsequently, in November 2023, Binance settled with the U.S. Department of Justice for $4.3 billion, admitting violations of U.S. money laundering and terrorism financing laws.

Zhao pleaded guilty to money laundering charges as part of the settlement and is awaiting his criminal sentencing, scheduled for April.

Disclaimer

This article is provided for information only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.