Two residents from Florida and a person from California are suing Binance US, the United States affiliate of Binance, the world’s largest cryptocurrency exchange by trading volumes; three Binance international entities; Changpeng Zhao, the Binance CEO; and three influencers, including Jimmy Butler of the Miami Heat, and vocal YouTube star, Ben Armstrong better known as “BitBoy,” for $1b.
Binance, executives and international entities, and influencers sued for $1b
The lawsuit, filed by the Moscowitz Law Firm and Boies Schiller Flexner in the Southern District of Florida on March 31, alleges that Binance facilitated the trading of unregistered securities and that influencers, like Butler and BitBoy, were paid by the exchange to promote them.
As the lawsuit lays out, the plaintiffs want to be compensated for all the losses incurred following their purchase of instruments broadly classified as investment contracts, falling under the purview of the United States Securities and Exchange Commission (SEC) as they are consistent with Howey Test criteria.
Under the Howey Test, users can define what constitutes a security under United States law, specifically spelled out in the Securities Act of 1933.
Two of the test’s principles state that if a user invests in an asset with an expectation of profiting or makes an investment of money, then its stock, in this case, a token, can be described as a security.
The security issue
Within the Floridian and Californian securities laws, the plaintiffs, through their lawyers assert that assets listed by Binance and promoted by their influencers are also classified as unregistered securities.
Moscowitz Law Firm and Boies Schiller Flexner say they have been investigating tokens listed by Binance which ended up being purchased by their clients, whom they claim represented millions of other investors impacted, for over a year. Throughout their filing, the plaintiffs’ lawyers describe them as unregistered securities and now want their clients to be compensated as stated by the law as Adam Moscowitz, the founding and managing partner of the Moscowitz Law Firm, explains:
“The statute clearly states that if an influencer is promoting an unregistered security, and has a financial interest in doing so, the influencer may be liable to everyone who bought the assets. The exchange that facilitates the trades would be liable as well.”
However, whether they will win this case depends on whether the Florida court will confirm that the tokens listed are securities. Still, if they do, “there will be no question that Binance and the influencers are liable.”
The United States Commodity Futures Trading Commission (CFTC) is also suing Binance and Changpeng Zhao for violating the country’s trading laws.