TL:DR
- Binance, one of the largest cryptocurrency exchanges in the world, is facing a new class-action lawsuit from the Moskowitz Law Firm in Florida
- The Moskowitz Law Firm has been investigating Binance and its alleged securities fraud for the past year.
- While Binance still takes in more volume than the rest of its combined competitors, its market share has slipped over the past two weeks following a lawsuit from the CFTC and its decision to halt some zero-fee trading.
Binance, one of the largest cryptocurrency exchanges in the world, is facing a new class-action lawsuit from the Moskowitz Law Firm in Florida. This follows the firm’s previous complaints against FTX and Voyager Digital, both of which were also accused of promoting and selling unregistered securities. The complaint against Binance, which includes CEO Changpeng Zhao and various influencers who promoted the exchange, alleges that the exchange sold and promoted unregistered securities to hundreds of thousands of victims.
The Moskowitz Law Firm is using Florida’s state-level Blue Sky laws as the basis for its lawsuit against Binance. These laws are designed to protect investors and consumers from securities fraud, requiring securities to be registered in a truthful and accurate manner. Since cryptocurrency is not traded on a national securities exchange, it falls under state-level regulations. Legal experts believe that this could open up the possibility for more unregistered securities complaints against other cryptocurrency exchanges.
The Moskowitz Law Firm has been investigating Binance and its alleged securities fraud for the past year. The firm claims its investigation revealed that Binance is also selling unregistered securities and thus needs to be held accountable. Each and every promoter of these unregistered securities, including Miami Heat star Jimmy Butler, will be held responsible, the firm said.
While Binance still takes in more volume than the rest of its combined competitors, its market share has slipped over the past two weeks following a lawsuit from the CFTC and its decision to halt some zero-fee trading. Blockchain analytics platform Kaiko reported that Binance “lost 16% market share of trade volume,” with its market share at 54% as of the end of Q1, however, its U.S. arm, Binance.US, managed to triple its market share over the quarter from 8% to 24%. Binance only lost about 2% of market share for perpetual futures trade volume.
Source:Kaiko
James Vivenzio, senior counsel at Perkins Coie, commented during a recent webinar that “the state ‘Blue Sky’ theory seen here doesn’t arise in a lot of other cases when you’re dealing with nationally exchange-traded securities, because there’s a federal statute that says you can’t bring a class action for those times.” The Moskowitz Law Firm has been investigating Binance and its alleged securities fraud for the past year, according to Adam Moskowitz, the firm’s lead attorney.
Shortly before the class action was filed against Binance, the Commodity Futures Trading Commission (CFTC) also sued the exchange for allegedly breaking derivatives trading laws. In the suit, the CFTC claims that bitcoin and ether are commodities, rather than securities. Binance’s decision to end zero-fee trading for some trading pairs, including BNB, BTC, and ETH with multiple fiat currencies and stablecoins, also led to a loss in trading volume, according to blockchain analytics platform Kaiko. As a result, Binance’s market dominance fell by 16%, with its market share dropping to 54% by the end of the first quarter.
A legal battle with the CFTC could have serious consequences for Binance’s $1 billion acquisition of the assets of insolvent cryptocurrency lender Voyager. A New York judge stated on Friday that the U.S. government possesses a “considerable case on the merits” in its effort to halt the acquisition. The judge expressed her intention to expedite the resolution of this dispute as delays could result in monthly costs of up to $10 million for the estate.
In light of recent regulatory pressures, the banking crises, and the catastrophic collapse of FTX, many reports have observed a growing trend toward decentralized alternatives and self-custody wallets. Bitcoin and Ether left centralized exchanges in record numbers following the fall of FTX. The daily trading volume of decentralized perpetual exchanges also reached $5 billion in November 2022, the most since Terra Luna Classic (LUNC) and its connected TerraClassicUSD (USTC) stablecoin collapsed in May 2022. Trading volumes on the decentralized exchange Uniswap are now rivaling that of crypto exchanges Coinbase and OKX but are still only a fraction of that processed by Binance.
The allegations against Binance and other cryptocurrency exchanges highlight the need for greater regulation and transparency in the crypto industry. While cryptocurrency offers many benefits, including decentralization, anonymity, and low transaction fees, it is still a relatively new and largely unregulated market. As a result, investors must be cautious and do their due diligence before investing in any cryptocurrency, including those offered on reputable exchanges like Binance.
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