Binance Hits Roadblock? Judge Approves Most of SEC's Charges, Only BUSD and Earn Services Not Considered Investment Contracts

A U.S. federal judge ruled in a court document on the 28th that most of the Securities and Exchange Commission (SEC)’s allegations against the exchange Binance.US will be approved, including the involvement of securities sales in BNB's ICO and operating as an unregistered exchange broker; while the allegations that the stablecoin BUSD and the Simple Earn program are securities have been dismissed.

Judge Upholds Most of SEC's Charges Against Binance.US

On Friday evening, District Court Judge Amy Jackson ruled in favor of the SEC, approving most of the 13 charges against Binance, while dismissing allegations related to BUSD, Simple Earn, and secondary market sales of BNB involving securities or investment contracts.

Specifically, the approved charges include:

• Binance's former CEO Changpeng Zhao "CZ" and related entities continued to control Binance.US behind the scenes
• Initial Coin Offering (ICO) of BNB and BNB Vault involving securities sales
• Binance offering securities trading without proper registration under the Exchange Act
• Data provider BAM Trading involved in misleading investors, selling investment contracts, and violating anti-fraud provisions

The charges that were dismissed and revoked include:

• Issuance and sale of stablecoin BUSD involving securities sales
• Secondary market sales of platform token BNB involving securities sales
• Simple Earn service involving securities sales

U.S. SEC accuses Binance Holdings and Changpeng Zhao of violating securities laws, BNB hits recent lows, CZ responds 4

Jackson stated:

I find the SEC's observations to be clear and convincing, particularly in distinguishing between "investment contracts" and "tokens themselves," consistent with the earliest interpretations of the term "investment contract" by the Supreme Court, which has appeared in the list of definitions of "securities."

BUSD and Simple Earn Services Not Deemed Investment Contracts

Judge Jackson expressed approval for the discontinued stablecoin BUSD and Simple Earn services, stating that neither constitutes an investment contract:

The initial description, sales method, and distribution of sales proceeds for BUSD do not meet the standards of the Howey test.

Why did the SEC accuse Binance's BUSD of being a security? Paxos and Binance profiting from BUSD?

Furthermore, Jackson cited the previous opinion of Judge Analisa Torres in the Ripple case, stating that the sale of BNB on the secondary market is not illegal, and thus dismissed the SEC's charges against the secondary market sales of BNB.

Previously, the SEC referenced the Terraform Labs ruling, hoping to further establish the basis for considering Binance's "BUSD as a security," but now faced a setback.

Industry Experts: A Significant Victory in the Crypto Space

FOX crypto reporter Eleanor Terrett expressed optimism about the ruling, anticipating that lawyers for companies currently in litigation such as Coinbase, Kraken, and Consensys will use the ruling on "investment contracts" to strengthen their positions in their lawsuits.

Meanwhile, crypto industry lawyer MetaLawMan believes that this is a major victory in the crypto space:

The dismissal of the SEC's charges on third-party secondary market sales is clearly a victory for the crypto industry.

Last June, the SEC made a significant move by suing Binance, alleging that the company offered unregistered securities sales of BNB, BUSD, SOL, and operated unlawfully in the U.S.

Three months later, Binance also filed a motion to dismiss, claiming that the SEC exceeded its regulatory authority and exercised power excessively, while also retroactively expanding the standards and definitions of securities.

Currently, a court hearing for the case is scheduled for July 9th; and former CEO CZ reported to prison last month for a 4-month sentence for violating sanctions charges from the U.S. Department of Justice and Treasury.