Binance faces legal setback as US Supreme Court upholds crypto lawsuit against exchange

Binance’s attempt to quash a lawsuit alleging the illegal sale of crypto assets has failed after the US Supreme Court declined to hear its appeal, according to a recent report from Bloomberg Law.

The lawsuit, filed in 2020 by a group of Binance investors, claims the crypto exchange failed to warn them about risks associated with several tokens, such as ELF, EOS, and FUN, which they purchased in 2017. Investors are seeking compensation for losses, interest, and legal fees.

Binance, in defense, contends it shouldn’t be subject to US securities laws as it’s not a US-based company.

The case was initially dismissed by a US district court in March 2022 as the judge sided with Binance that US securities laws didn’t apply because the transactions were deemed to be “extraterritorial” and some claims were filed too late.

However, an appeals court later overturned this decision, finding sufficient evidence that the transactions were domestic based on server location and investor activities within the US, according to a public document shared by Bloomberg Law.

Following the decision, Binance and its former CEO Changpeng Zhao petitioned the Supreme Court. They argued that the 2nd Circuit misapplied the 2010 Morrison v National Australia Bank decision by allowing liability across multiple stages of securities transactions and countries.

According to Reuters, Binance CEO Richard Teng asserts that the company has not determined its headquarters location. The exchange, which was founded in China, maintains it should not be subject to US securities laws.

The Supreme Court’s latest decision means that investors can now move forward with their case. If the court rules in favor of the investors, Binance could be required to pay damages or restitution to those who purchased the tokens.

This article first appeared at Crypto Briefing