On Friday evening, the Moscowitz Law Firm and Boies Schiller Flexner filed a class action lawsuit targeting Binance's companies, including its US branch and three main international entities, the company's founder and CEO Changpeng Zhao (CZ), and three crypto influencers: Jimmy Butler, a Miami Heat star, Ben Armstrong, a content creator going by the nickname BitBoy Crypto, and Graham Stephan, a YouTuber boasting nearly 4.3 million subscribers.
Over $1 billion in damages for promoting the sale of unregistered securities
The suit was filed on behalf of three plaintiffs, two of them based in Florida and one in California, who lost money trading cryptocurrency promoted by Binance and the influencers. There may be more to follow, though, with potentially "millions of people eligible for damages," according to the complaint. The suit, filed in the Southern District of Florida, seeks compensation in excess of $1 billion.
The action is founded on the assertion that the assets traded on the exchange are in fact unregistered securities, which were being promoted illegally by the Binance-paid influencers. "This is a classic example of a centralized exchange, which is promoting the sale of an unregistered security," Adam Moskowitz, founding and managing partner of the Moskowitz Law Firm (MLF), said in an interview with Fortune.
Crypto celebrities potentially liable for "everyone who bought the assets"
MLF is hardly a newcomer to the "crypto-as-a-security" issue. Last year, the company brought a class action against Voyager Digital for allegedly helping lure customers and contributing to investors losses of $5 billion. It also coordinated two actions against FTX before federal and state courts, targeting the failed company's brand ambassadors, including such celebrities as Shaquille O'Neal, Larry David, Steph Curry, and Tom Brady.
Read also: Binance fined €3.3 million by Dutch central bank
"The statute clearly states that if an influencer is promoting an unregistered security, and has a financial interest in doing so, the influencer may be liable to everyone who bought the assets. The exchange that facilitates the trades would be liable as well," Moskowitz explains.
CFTC goes after Binance
The latest suit eerily coincides with the United States Commodity Futures Trading Commission's legal action (CFTC) launched against Binance in the US District Court for the Northern District of Illinois on March 27. The institution charged CZ and three entities running the exchange with "numerous violations of the Commodity Exchange Act (CEA) and CFTC regulations," seeking "disgorgement, civil monetary penalties, permanent trading and registration bans, and a permanent injunction against further violations of the CEA and CFTC regulations."
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The complaint enumerates a series of violations and alleges Zhao's liability for Binance's purported infringements. "Zhao owned and controlled dozens of entities that operate the Binance platform as a common enterprise. Zhao is alleged to have been responsible for all major strategic decisions at Binance, including devising the secret plot to instruct U.S.-based VIP customers to evade Binance's compliance controls and instructing Binance employees to ensure all communications about their control subversion took place over applications that facilitated the automatic destruction of evidence," the document reads.
Is there a creeping global crackdown on crypto?
Binance has been in the CFTC's crosshairs since at least 2021. The company has also been taking significantly more heat since the FTX collapse and ensuing turmoil around crypto. Two cases of legal artillery being brought out against one platform in less than a week make one wonder whether there's something more at play than "accurate" timing.
While suggestions of a global crackdown on crypto may be too far-fetched, it's worth reminding that the world's superpowers are diligently working to regulate the industry and put it under more efficient surveillance.
Last week the UK announced its plans to establish multi-agency force for identifying and seizing illicit cryptocurrency, the EU lawmakers voted in favor of imposing drastic limits on anonymous crypto transfers, and the news broke that the G7 governments were scheming to roll out tougher regulations for the crypto industry.
