Binance.US Is Being Sued by Investors Over Terra Meltdown
KEY POINTS
- Investors face "disastrous consequences" after Binance allegedly claimed that Terra USD was a safe coin, before last month's crash.
- Jeffrey Lockhart files a class-action lawsuit against the exchange.
- Binance doubles down on a position of innocence, citing its registration with FinCEN.
The Terra LUNA drama continues as Binance.US is sued for losses from the stablecoin crash.
On June 5, 2023, the Securities and Exchange Commission (SEC) filed a lawsuit against Binance and its entities, citing violations of federal securities law. For additional information, check out our additional coverage.
The cryptocurrency world has been buzzing about the Terra LUNA crash since it happened last month. And now the drama continues and reaches over to Binance.US. A TerraUSD investor is claiming that the crypto exchange disregarded federal regulations and as a result, users experienced "disastrous consequences."
The stablecoin, which lost its peg and 99% of its value, plummeted last month and has since inspired lawsuits in South Korea. Now we are seeing the first lawsuit in the U.S., as a U.S. investor sues Binance.US and its CEO claiming that the exchange marketed Terra USD as a secure asset prior to the crash. Binance allegedly claimed that it was safe because it was backed by a fiat currency, when in fact it was an unregistered security backed by its sister coin LUNA, whose value was tied to it.
Details of the lawsuit
These accusations are brought forth in a class-action lawsuit in California by Jeffery Lockhart, a Utah resident and crypto investor. In a statement in his lawsuit, he claimed, "Binance U.S. profits from every trade, and therefore has a stark incentive to sell cryptoassets irrespective of their compliance with the securities laws." And went on to say, "From Binance U.S.'s perspective, the less disclosure, the better." Lockhart takes the stance that Binance knowingly promoted the volatile project based on vested interest. Not only that, but the cryptocurrency exchange also supported Terra Labs attempt at a revival when they launched Terra 2.0 and a new version of LUNA.
The lawsuit states, "Binance US's parent company blithely added insult to injury when, on May 31, 2022, it began selling Luna 2.0 — a new token which, just like LUNA, is centrally controlled by ." Plaintiffs feel misled by the exchange, which touted these coins as "safe."
Binance is not backing down, however. The company reasserts that it is registered by FinCEN (Financial Crimes Enforcement Network). The exchange's spokesperson came out to say, "These assertions are without merit and we will defend ourselves vigorously." They also said the exchange will delist Terra USD, but that decision was made prior to the lawsuit (and for obvious reasons).
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Katie Clinebell is a freelance content creator and digital marketing strategist for FinTech, blockchain, and crypto brands. She has created award-winning campaigns for Snapple and Tai Pei Frozen Asian Food and received an Adobe Academic Achievement Award for content about Olympic athletes.
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