U.S. District Judge Andrew Carter dismissed a lawsuit against cryptocurrency exchange Binance Thursday.
The motion to dismiss was filed by Binance and CEO Changpeng Zhao (CZ). The lawsuit (case no. 20-02803) was originally filed in April 2020 in the U.S. district court in the Southern District of New York.
Binance is accused of violating U.S. securities laws by selling cryptocurrencies that are allegedly unregistered securities. The exchange is also accused of failing to register as a securities exchange or broker-dealer with U.S. regulators.
The case involves nine cryptocurrencies — EOS, QSP, KNC, TRX, FUN, ICX, OMG, LEND, and ELF — which the plaintiffs bought through Binance’s online exchange starting in 2017. However, the coins soon lost significant value.
The plaintiffs alleged that Binance “wrongfully engaged in millions of transactions” and failed to warn them about the “significant risks” of investing in these cryptocurrencies. They sought to recoup what they paid.
However, Judge Carter ruled that the plaintiffs sued Binance too late, citing that more than a year had passed between the time of their purchases and the time they filed the lawsuit.
In addition, the federal judge said that U.S. securities laws did not apply because Binance was not a U.S.-based exchange, even if it used Amazon computer servers in the U.S. He wrote:
Plaintiffs must allege more than stating that plaintiffs bought tokens while located in the U.S. and that title passed in whole or in part over servers located in California that host Binance’s website.
Binance was not the only cryptocurrency exchange recently sued for allegedly selling unregistered crypto securities. In March, three Coinbase users filed a class-action lawsuit against the Nasdaq-listed crypto exchange, claiming that the platform sold 79 unregistered securities.
In the U.S., the Securities and Exchange Commission (SEC) has not actively stated which cryptocurrencies are securities. However, SEC Chairman Gary Gensler said on several occasions that many of the cryptocurrencies listed on exchanges with 50 to 100 listings are likely securities.