The motion to dismiss a lawsuit filed by Binance’s legal team highlights the argument that CZ is not subject to US jurisdiction as he resides in the United Arab Emirates.
Binance, the world’s largest cryptocurrency exchange, filed a motion to dismiss a lawsuit brought against the company by the United States Commodity Futures Trading Commission (CFTC). Attorneys representing the exchange submitted the request to a US federal judge on Thursday, asserting that the commodities watchdog lacks jurisdiction in several charges leveled against the company and its executives.
On July 25, Binance and its CEO Changpeng Zhao (CZ) revealed their plans to appeal the CFTC lawsuit, which claimed that the company deliberately evaded US laws by permitting American users to engage in crypto derivatives trading activities without proper registration. The charges also include former chief compliance officer Samuel Lim for failing his duties.
Shortly after the disclosure, the company has now filed a motion to dismiss the case, citing inadequacies from the CFTC. Binance said in the appeal filed on Thursday, July 27, that the CFTC is attempting to exert authority beyond its statutory limits by trying to regulate foreign entities and individuals operating outside the United States.
“In this case, the CFTC seeks to regulate foreign individuals and corporations that reside and operate outside the United States – outstripping the limits of its statutory authority and treading on deep-rooted principles of comity with foreign sovereigns,” reads the court document.
Binance Claims that CFTC Lawsuit Is Based on Inconsistent Theories
The exchange contends that the regulator’s claims are based on inconsistent theories and irrelevant allegations, and the CFTC’s attempts to assert its jurisdiction undermine the principles of cooperation with foreign sovereigns. Similarly, the company’s former compliance officer filed a motion to dismiss on the same grounds.
The case is currently being heard in the US District Court for the Northern District of Illinois, with both parties submitting their arguments for dismissal without the need for an initial hearing. The court’s decision on the appeal will have significant implications for Binance, CZ, and the broader crypto industry.
Binance and its CEO have faced increasing regulatory scrutiny globally following the market downturn in 2022, which caused several major crises in the industry. Despite the company’s dominant position in the crypto markets, the exchange has recently witnessed a decline in spot digital-asset trading volumes.
Earlier this month, CZ sought to address concerns about Binance’s outlook after the departure of key executives who played a role in navigating the regulatory challenges. The Binance boss disagreed with the CFTC’s characterization of many issues in its complaint, emphasizing that crucial facts were omitted.
The motion to dismiss filed by Binance’s legal team highlights the argument that CZ is not subject to US jurisdiction as he resides in the United Arab Emirates. The attorneys cited email interactions that allegedly occurred more than a year before Binance offered the derivatives products in question as evidence.
Binance Faces More Regulatory Challenges in the US
Aside from the CFTC lawsuit, Binance and CZ are also facing enforcement action by the US Securities and Exchange Commission (SEC), which accused them of mishandling customer funds, misleading investors and regulators, and violating securities regulations.
In response to the lawsuit, Binance vowed to defend its platform “vigorously”. However, both suits from the financial regulators have posed significant challenges to the exchange’s operations in the US and have the potential to impose monetary penalties and ban Binance and its executives from conducting business in the country.
Chimamanda is a crypto enthusiast and experienced writer focusing on the dynamic world of cryptocurrencies. She joined the industry in 2019 and has since developed an interest in the emerging economy. She combines her passion for blockchain technology with her love for travel and food, bringing a fresh and engaging perspective to her work.