Binance to face US securities regulator in court

© Reuters. FILE PHOTO: A smartphone with the Binance logo and a representation of cryptocurrencies placed on a keyboard in this illustration taken June 8, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

By Chris Prentice, Jody Godoy and Hannah Lang

(Reuters) -Binance will face the US Securities and Exchange Commission (SEC) in a Washington court next week, in another high-profile hearing involving the agency and a cryptocurrency exchange that could define How cryptocurrencies are regulated.

The world's largest cryptocurrency exchange previously asked federal Judge Amy Berman Jackson to dismiss a lawsuit the SEC filed in June alleging that Binance violated its rules, and is expected to present its dismissal case before her on Monday.

The regulator accused Binance, its CEO and founder Changpeng Zhao, and the exchange's U.S. arm of artificially inflating their trading volumes, diverting customer funds, failing to restrict U.S. customers' access to its platform, and misleading to investors about its market surveillance controls.

It also accused Binance of illegally facilitating the trading of several crypto tokens that the SEC deemed unregistered securities.

The hearing was originally scheduled for Friday, but was postponed due to snow in the Washington, D.C., area, the court said in a notice. It has been rescheduled for Monday, January 22 at 10 a.m. EST (1500 GMT), according to the notice.

The hearing will follow a separate hearing earlier this week in the SEC's case against rival US crypto exchange Coinbase (NASDAQ:), which was also accused by the SEC of trading cryptocurrencies that should have been registered.

The SEC has long argued that most crypto tokens are similar to securities subject to its oversight, while the crypto sector largely disputes the SEC's stance. Both cases are expected to help shape the SEC's authority over the sector.

BAM Trading, the operator of Binance.US, has said in court filings that the SEC does not have the authority to supervise crypto assets, an argument similar to that of Coinbase, which is also seeking to have the SEC case dismissed.

Binance has also said that the US regulator has not proven that Binance committed fraud.

Last year, Binance Holdings agreed to pay $4.3 billion to settle with the Department of Justice and the Commodity Futures Trading Commission for illicit finance violations, and Zhao pleaded guilty to violating U.S. anti-trust laws. money laundering. But the SEC case still hangs over the stock market.

While Binance has settled with other agencies, including the DOJ and CFTC, it has been unwilling to settle with the SEC because doing so would mean admitting that the tokens cited in the case are securities, a source familiar with the proceedings said. discussions. That admission could affect Binance's business model, perhaps more than anti-money laundering compliance issues, the source said.

Binance also wanted to take its chances in court, believing it had strong arguments that the SEC was overstepping its jurisdiction and had not proven fraud, a second person with knowledge of the matter said.

The two sources declined to be identified because the legal process is confidential.

The SEC's lawsuit against Binance is one of a series of cases the regulator has brought against crypto companies in recent years.

The SEC initially focused on companies that sold digital tokens, but has focused on companies that offer trading platforms and clearing activities, and that act as broker-dealers.

The SEC had a winning track record in crypto when it sued companies over the tokens they issued. But last year it suffered a partial loss in a high-profile case against , another crypto company.