Appeals Court Revives Investor Lawsuit Against Binance

Despite the fact that Binance is facing increased legal heat from all sides, BNB is proving its resilience by reaching new highs.

Binance is facing even more legal challenges in the United States, including a revived class-action lawsuit alleging that Binance sold unregistered securities. Despite these legal hurdles and a significant $4.3 billion settlement over charges of money laundering and terrorism financing, Binance's native token, BNB, has seen a remarkable surge in value, becoming the third-largest cryptocurrency by market cap, excluding stablecoins. Meanwhile, in Nigeria, Binance's decision to halt operations with the Nigerian naira has caused a lot of concern among local crypto traders and stakeholders who believe it will affect the livelihoods of many Nigerians and could increase youth unemployment in the country.

A United States appeals court recently overturned a decision by a district court to dismiss a class-action lawsuit brought against the crypto exchange, Binance, by a group of investors. The lawsuit, which was started by Chase Williams in April of 2020, accuses Binance of engaging in the sale of what the plaintiffs argue are securities, without proper registration as a securities exchange or broker-dealer. This legal challenge also focuses on allegations of transparency issues in Binance's operations, especially concerning the sale of crypto-assets termed "tokens."

The initial dismissal by the district court, which deemed the investors' claims untimely based on statutes of limitations, was countered by the United States Court of Appeals for the Second Circuit. In a Mar. 8 filing, the appeals court stated that the district court's reasons for dismissing the case were incorrect, siding with the plaintiffs. The investors are not only seeking damages for what they claim is a violation of Section 12(a)(1) of the Securities Act of 1933 but they also want to annul their contracts with Binance.

This is just one of many legal challenges Binance is facing in the United States at the moment. On Mar. 6, reports emerged that the U.S. Securities and Exchange Commission (SEC) had been struggling to get information from Binance about the custody of customer assets. Furthermore, in June of 2023, the SEC filed a lawsuit against Binance, Binance.US, and the company's founder, Changpeng “CZ” Zhao, accusing them of selling unregistered securities and mishandling customer funds. Binance agreed to a $4.3 billion settlement with the U.S. Department of Justice in November of 2023 over charges of money laundering and financing terrorism, with Zhao pleading guilty to related charges.

BNB's Resilient Surge

Despite Binances extensive legal struggles, BNB saw an impressive surge in its value, climbing by around 62% in just 30 days and reaching its highest level in two years at $489.50 on Mar. 8. At press time, BNB was trading above the $500 mark at $516.53 after its price was able to climb by more than 4% over the past 24 hours of trading. This propelled BNB to become the third-largest cryptocurrency by market capitalization, excluding stablecoins. BNB’s success could be attributed to the broader market's gains, which brings up questions about the sustainability of this rally.

Unfortunately, the future of Binance and its founder, Changpeng "CZ" Zhao, casts a shadow over BNB's impressive rise. CZ's plea deal with the U.S. federal court in November, concerning allegations of facilitating the transfer of "stolen funds" through Binance, have led to a lot of doubts about the token's prospects. His agreement to step down as CEO added to the uncertainty, especially considering BNB's value is closely tied to the Binance exchange ecosystem.

On the bright side, Binance has showcased its platform's reliability during the recent market rally, in stark contrast to competitors like Coinbase, which faced multiple outages. Criticisms from crypto investors and comparisons to the infamous MtGox case have pointed out Coinbase's struggles with liquidity and operational stability, which only seems to highlight Binance's competitive edge when it comes to its robust trading engine and infrastructure.

Nigeria's Crypto Landscape Post-Binance

Meanwhile, the crypto community in Nigeria is facing a major challenge after Binance's decision to stop its naira operations in the country. This move has brought up some concerns among local stakeholders, who are scared that it could negatively impact many Nigerians' livelihoods and potentially increase youth unemployment. The delisting of Nigerian naira-related services from Binance is expected to create a void in the market, but many believe local crypto exchanges could emerge to fill the gap left by Binance's exit.

Nathaniel Luz, the CEO of Flincap, a liquidity platform for crypto exchanges, pointed out the immediate effect on Nigerian traders who relied on Binance's peer-to-peer trading platform for their income. With Binance exiting, some traders resorted to conducting transactions in informal settings like WhatsApp and Telegram groups.

Oladotun Wilfred Akangbe, the chief marketing officer of Flincap, also pointed out the broader implications of the situation. The ongoing uncertainty around crypto regulation in Nigeria, coupled with the halt of Binance's operations, could severely undermine confidence in the crypto space. This scenario may lead to heightened fear, uncertainty, and doubt among the Nigerian crypto community.

In response to the regulatory pressures, Binance announced big changes for its Nigerian users. From Mar. 8, the platform started automatically converting naira balances to Tether (USDT) and completely stopped support for naira deposits earlier in March. Additionally, withdrawals have been disallowed since Mar. 8, with the platform setting a conversion rate of 1 USDT to 1,515.13 naira. This move came after the delisting of all naira trading pairs on Binance's peer-to-peer platform in late February.

The backdrop to these developments includes concerns from the Central Bank of Nigeria (CBN) about crypto exchanges, including Binance, facilitating illicit transactions. The CBN pointed to "suspicious flows" of funds as a major concern, prompting increased scrutiny of Binance's operations. The Nigerian House of Representatives Committee on Financial Crimes also intervened, requesting the new Binance CEO Richard Teng to appear before the committee.