In a series of court filings Tuesday, Binance pushed for the suit to be dismissed, claiming that the SEC has applied a “novel, contorted interpretation” of securities laws, and accusing the regulator of “territorial aggrandizement.”
In the first of its filings, Binance and its founder Changpeng ‘CZ’ Zhao argued that the regulator had built “virtually its entire case on the argument that an “investment contract” need not include either an investment or a contract.”
The SEC’s complaint, the exchange said, “focuses on transactions by customers who clicked on a website, bought tokens from other anonymous token owners, and then logged off.”
Binance claimed that no contract existed with a promoter to “invest money into a common business enterprise,” and added that the regulator had ignored that the existence of an “investment contract” should be determined on a transaction-by-transaction basis.
In its second filing, lawyers for BAM Trading Services, Binance’s American subsidiary, accused the SEC of overreach, arguing that it “seeks regulatory jurisdiction over virtual commodities that Congress has not conferred on it,” and that in order to apply securities law to its platform, one would have to “ignore the word “contract” in the term “investment contract”.”
In a third filing, Binance and Zhao pushed back against the SEC’s efforts to include the exchange’s guilty plea as part of its settlement with the Department of Justice in its own case. Lawyers for the exchange argued that Binance and Zhao’s admitted violations of the Bank Secrecy Act fail to “say anything about whether there was fair notice of the SEC’s theory that the crypto assets at issue were securities under the Securities Act or the Exchange Act.”
In June, the SEC hit Binance and its former CEO Zhao with 13 charges including the unregistered offer and sale of crypto assets, failure to restrict U.S. investors from accessing Binance.com, and operating as an unregistered exchange, broker, and clearing agency. The SEC also alleged that the exchange commingled billions of dollars in customer funds in an account belonging to Merit Peak, an entity controlled by Zhao.
Binance has filed number of motions in its bid to have the SEC’s case thrown out of court, arguing that it “has no legitimate authority over crypto exchanges” and accusing it of being engaged in a regulatory land grab over the crypto industry.