A federal appeals court is reportedly overturning the dismissal of a lawsuit accusing crypto exchange Binance of violating US securities laws by selling unregistered tokens.
In March 2022, District Judge Andrew Carter threw out a class action lawsuit brought by crypto investors who used Binance to purchase tokens that eventually witnessed a massive price decline.
The crypto investors started to accumulate the tokens through Binance in 2017 including aelf (ELF), EOS (EOS), FUNToken (FUN), ICON (ICX), OMG Network (OMG), Quantstamp (QSP), LEND, Kyber Network Crystal (KNC) and Tron (TRX). The plaintiffs wanted to recoup their investments, saying that the world’s largest crypto exchange failed to warn them about the significant risks of buying the crypto assets.
But Judge Carter decided in favor of Binance, saying that domestic securities laws were not applicable because Binance is not a domestic exchange. He also said the investors did not act in a timely manner as they filed the lawsuit about a year after making the purchase.
Reuters now reports that the 2nd US Circuit Court of Appeals in Manhattan is reviving the lawsuit.
In a 3-0 decision, the appellate court says that domestic securities laws were applicable in the case because the token purchases had become irreversible in the US after making payment. The court also finds that Binance relies on Amazon’s domestic computer servers to host its platform.
Circuit Judge Alison Nathan says Binance “notoriously denies the applicability of any other country’s securities regulation regime.”
The appellate court adds that investors may still seek to recoup their capital if they invested a year before they filed the lawsuit.
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