Cristiano Ronaldo sued for promoting Binance, unregistered securities

November 29, 2023 Coin Telegraph

Binance

The soccer star’s Binance-tied NFTs allegedly promoted investments in unregistered securities on the crypto exchange.

Pro-soccer star Cristiano Ronaldo has been hit with a proposed class-action lawsuit from plaintiffs claiming they suffered losses from his promotion of the now-legally embroiled crypto exchange Binance.

A Nov. 27 filing to a Florida District Court claimed Ronaldo “promoted, assisted in, and/or actively participated in the offer and sale of unregistered securities in coordination with Binance.”

Binance entered a multi-year partnership with Ronaldo in mid-2022 to promote a series of his own nonfungible tokens (NFT), of which he has at least three collections tied to Binance.

The complaint claims users who signed up for Ronaldo’s NFTs were more likely to use Binance for other purposes — including investing in what they claimed were unregistered securities, including Binance’s BNB (BNB) and its crypto yield programs.

“Ronaldo’s promotions solicited or assisted Binance in soliciting investments in unregistered securities by encouraging his millions of followers, fans, and supporters to invest with the Binance platform.”

Ronaldo was a key part of Binance’s growing popularity due to his influence and reach, with 850 million followers across social media, says the complaint. They allege his NFT sales were “incredibly successful” at promoting the exchange, with a 500% increase in searches for “Binance” the week following the initial sale.

Cooking something up with @binance https://t.co/FMAP5GAdxE
— Cristiano Ronaldo (@Cristiano) November 28, 2023

The suit alleges Ronaldo knew or should have known “about Binance selling unregistered crypto securities” as he has “investment experience and vast resources to obtain outside advisers.”

The suit cited Securities and Exchange Commission guidance, which warned celebrities of the need to disclose payments received for promoting cryptocurrencies — which the complaint claims Ronaldo didn’t do.

The class action plaintiffs are Michael Sizemore, Mikey Vongdara and Gordon Lewis, who seek damages and funds to cover legal fees.

Meanwhile, Binance and founder Changpeng “CZ” Zhao is facing their own legal woes, pleading guilty and paying a $4.3 billion settlement to the United States on money laundering charges and running an unregistered money-transmitting business.

Zhao stepped down as CEO and faces up to 18 months in prison. Binance agreed to up to five years of Justice Department and Treasury compliance monitoring.

The SEC has sued Binance claiming — among other charges — that it sold unregistered securities and is reportedly investigating if Binance misappropriated customer funds.

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SEC sues Kraken alleging it violated securities laws

November 20, 2023 Coin Telegraph

Binance used ‘tortured’ interpretation of law in bid to toss suit, says SEC

November 9, 2023 Coin Telegraph

Binance

The SEC derided Binance’s request to have the regulator’s suit thrown out, claiming the crypto exchange hasn’t correctly applied the law.

Binance’s arguments used in its motion to dismiss a lawsuit from the United States securities regulator relies on an incorrect legal analysis and have no basis in law, the regulator has argued.

In a Nov. 7 court filing the SEC rebuffed Binance’s earlier bid to toss the regulator’s suit saying no court has adopted Binance’s “tortured interpretation of the law.”

The SEC sued Binance in June alleging it, Binance.US and its founder Changpeng “CZ” Zhao sold unregistered securities and failed to register as an exchange in the United States.

Binance argued the SEC failed to introduce crypto guidelines, misinterpreted securities laws and applied them to crypto and called the suit an overstep of its authority.

In its latest rebuttal, the SEC claimed Binance “never complied” with federal securities laws which was “a deliberate choice.”

“Binance’s Chief Compliance Officer crudely but succinctly summed up this case when he admitted that Binance was ‘operating as a fking unlicensed securities exchange in the USA bro.’ He was right.”

It added Binance’s arguments that compared crypto to “supermarket items like oranges [...] are absurd” and claimed the crypto exchange’s crypto sales are investment contracts under the Howey test.

The regulator reiterated its claims the BNB (BNB) initial coin offering violated securities laws and Binance USD (BUSD) along with the yield-bearing staking, Vault and Earn programs are investment contracts.

*Highlighted excerpt of the SEC’s arguments claiming Binance sold unregistered securities from unregistered exchanges in the U.S. Source: CourtListener*

It also rebuffed Binance’s argument that the suit violated the major questions doctrine — a 2022 U.S. Supreme Court ruling saying Congress doesn’t delegate authority to agencies, which other crypto firms have cited in their aim to push back on the SEC’s claimed authority.

The SEC claimed granting Binance’s dismissal request would “dismantle decades of foundational precedent upon which the nation’s securities laws operate” and in its place would be a “rigid framework” that upends the “broad, flexible regime” of the current laws.

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Do Kwon and Terraform Labs ask judge to toss SEC’s lawsuit

October 31, 2023 Coin Telegraph

Coin Telegraph

Do Kwon, the co-founder now-collapsed Terraform ecosystem maintains he and his firm did not skirt U.S. securities laws.

Terraform Labs co-founder Do Kwon has requested a United States district judge to reject the securities and fraud suit from the federal securities regulator, claiming it has failed to prove they did anything wrong.

In an Oct. 27 filing to a New York District Court, lawyers for Kwon and Terraform argued its cryptocurrencies Terra Luna Classic (LUNC), TerraClassicUSD (USTC), Mirror Protocol (MIR) and its Mirrored Assets (mAssets) that reflect stocks on-chain are not securities as the Securities and Exchange Commission alleged.

“After two years of investigation, the completion of a discovery period that resulted in the taking of more than 20 depositions, and the exchange of over two million pages of documents and data, the SEC is evidentiarily no closer to proving that the Defendants did anything wrong,” the lawyers wrote.

They added the “evidence does not exist to support many of the SEC’s claims” and asserted the regulator “knew some of its allegations were false” — in particular, an allegation that Kwon and Terraform secretly moved millions into Swiss bank accounts for their own gain.

*Kwon’s lawyers claimed the SEC is trying to draw parallels between Terraform and FTX. Source: CourtListener*

In its suit against Kwon and Terraform filed in February, the SEC claimed the pair sent 10,000 Bitcoin (BTC) to a Swiss financial institution and withdrew $100 million. It also claimed they committed fraud by “repeating false and misleading statements.”

“The SEC knew this allegation was false when it filed this case,” Kwon’s lawyers wrote. ”This is made even worse by the undisputed fact that TFL had no customers, and thus no customer funds.”

The $40 billion Terra ecosystem collapsed in May 2022 after its USTC algorithmic stablecoin lost its U.S. dollar peg.

Kwon and Terraform also moved to exclude the opinion of the SEC’s experts including a report from Rutgers University economics professor Bruce Mizrach which they called “junk science.”

Judge Jed Rakoff, who oversees the case, denied Terraform’s earlier attempt to toss the lawsuit.

Kwon is currently detained in Montenegro and has previously asked the court to reject the SEC’s motion to extradite and interview him in the U.S.

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SEC asks judge to reject Coinbase’s motion to dismiss lawsuit

October 4, 2023 Coin Telegraph

Coin Telegraph

The regulator has asked a federal judge to deny Coinbase’s motion to dismiss its lawsuit, claiming the exchange knew the cryptocurrencies it sold were securities under the Howey test.

The United States Securities and Exchange Commission has asked a federal judge to deny Coinbase’s motion to dismiss a lawsuit by the regulator.

In an Oct. 3 filing in a New York District Court, the SEC hit back at claims in Coinbase’s dismissal motion and reiterated its belief that some of the cryptocurrencies listed on its platform were investment contracts under the Howey Test subject to SEC registration.

“Each crypto asset issuer invited investors — including purchasers on Coinbase’s platform — reasonably to expect the value of their investment to increase based on the issuer’s broadly-disseminated plan to develop and maintain the asset’s value,” the SEC wrote.

The SEC asserted Coinbase has “known all along” that cryptocurrencies it sells are securities if they meet the Howey Test and alleged the exchange recognized this in its filings with the SEC.

The regulator also scrubbed Coinbase’s argument invoking the “major questions doctrine” which claimed the SEC has no authority over the crypto market until Congress says so.

“The SEC has not assumed for itself any new power to do what the federal securities laws do not already expressly authorize it to do,” the SEC said.

In an Oct. 3 X (Twitter) post, Coinbase legal chief Paul Grewal said the SEC’s arguments were “more of the same old same old” and asserted the assets it lists “are not securities and are not within the SEC’s jurisdiction.”

The @SECgov just filed its opposition to our motion to dismiss their case against @Coinbase. It’s more of the same old same old. But don’t just take my word for it – take a look for yourself. 1/7 https://t.co/QMdkRoiq0V
— paulgrewal.eth (@iampaulgrewal) October 3, 2023

Grewal claimed the SEC’s arguments in its response would mean “everything from Pokemon cards to stamps to Swiftie bracelets are also securities.”

Miles Jennings, a16z crypto' general counsel, claimed in an X post that the SEC’s motion “has a lot of holes.”

The SEC's opposition to @coinbase's motion has a lot of holes. Even if the court were to agree with the SEC's main contention (that investment contracts don't require legal contracts), the SEC's case should still fail.

As we discussed in our brief in August, the SEC's theory of… https://t.co/RTzlutSM9t
— miles jennings (@milesjennings) October 3, 2023

Jennings added even if the court were to agree with the regulators main argument around investment contracts then the case “should still fail” as he believes the SEC’s definition of an investment contract has “endless breadth.”

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Australian financial regulator sues eToro over ‘volatile’ trading products

August 3, 2023 Coin Telegraph

ASIC

The Australian Securities and Investments Commission alleged eToro users with no understanding of CFD product risks could still buy them on the platform.

Australia’s financial regulator has sued trading platform eToro over one of the leveraged trading products it offered to retail investors, alleging inappropriate screening tests caused thousands of users to lose money.

The Australian Securities and Investments Commission (ASIC) said on Aug. 3 it commenced Federal Court proceedings over eToro’s contract for difference (CFD) product for targeting too wide a market and breaching design and distribution rules.

CFDs are a type of leveraged derivatives contract that allows buyers to speculate on price movements of an underlying asset such as foreign exchange rates, stock market indices, single equities, commodities, or cryptocurrencies — all of which eToro offers.

ASIC alleged the CFDs offered by eToro were "high-risk and volatile" and the platform’s target market screening test didn’t properly exclude unsuitable customers from trading the product, stating:

“eToro’s screening test was very difficult to fail and of no real use in excluding customers for who the CFD product was not likely to be appropriate."

“For example, clients could amend their answers without limitation and clients were prompted if they selected answers which could result in them failing," it said.

ASIC is suing eToro for allegedly breaching design and distribution obligations and their licence obligations to act efficiently, honestly and fairly #CFD
— ASIC Media (@asicmedia) August 2, 2023

eToro’s crypto CFDs allow for up to two times leverage on certain assets. Others cover stocks, currencies, commodities and precious metals.

ASIC’s filing notice said CFD product risks were heightened where the underlying assets also had their own risks which included “extremely high-risk and volatile products such as crypto-assets.”

The regulator also alleged that eToro’s CFD target market was too broad, where users that had no understanding of CFD trading risks could still fall within its target.

“ASIC alleges that between 5 October 2021 and 14 June 2023, almost 20,000 of eToro’s clients lost money trading CFDs,” it added.

ASIC deputy chair Sarah Court said CFD issuers “cannot simply reverse engineer their target markets to fit existing client bases” and expressed disappointment in eToro’s alleged lack of compliance.

Cointelegraph contacted eToro and ASIC for comment but did not immediately receive a response.

In the United States, eToro halted trading in four cryptocurrencies following the tokens being labeled as securities in lawsuits by the Securities and Exchange Commission.

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Binance.US says user funds ‘remain safe’ amid SEC attempt to freeze assets

June 7, 2023 Coin Telegraph

Binance

The U.S.-based exchange said it is “fully operational” and called the Securities and Exchange Commission’s motion “unwarranted.”

Crypto exchange Binance.US has attempted to quell possible unrest from its users following a motion from the United States securities regulator seeking to freeze its assets “on an expedited basis.”

In a June 6 tweet, Binance.US reiterated that “user assets remain safe and secure" and added the platform “continues to be fully operational with deposits and withdrawals functioning as normal.”

Earlier on June 6, the SEC filed an emergency motion in the District of Columbia U.S. District Court asking for a temporary restraining order against Binance, Binance.US and Binance CEO Changpeng Zhao (CZ), requesting eight actions.

This afternoon, the SEC filed a motion seeking a TRO and preliminary injunction against https://t.co/AZwoBOgsqS attempting to, amongst other things, freeze https://t.co/AZwoBOgsqS corporate assets. User assets remain safe and secure and the platform continues to be fully…
— Binance.US (@BinanceUS) June 6, 2023

The requested actions include the freezing of the assets of Binance.US and the repatriation of fiat and cryptocurrency held by U.S. customers or for the benefit of U.S. customers. In addition, the motion prohibits the defendants from destroying, altering or concealing records and imposes other sets of conditions on discovery.

Some in the crypto community shared concerns that the restraining order could spark a “bank run” on the exchange.

The emergency motion from the SEC is not expected to directly impact the customers' ability to withdraw, and will still require a district judge's sign-off to go ahead.

*Excerpt from the temporary restraining order by the SEC. Source: CourtListener*

Binance.US said the injunction was “unwarranted,” claiming it was filed as part of a ploy to gain an advantage in litigation after the exchange spent the past week in dialogue with the SEC. Binance.US stated:

“The filing of the preliminary injunction is unwarranted and based more on the SEC Staff obtaining an advantage in litigation versus genuine concern about the safety of customer assets.”

"Despite the information the company has provided to ensure SEC Staff of the safety of customer assets, the Staff has nonetheless decided to file the motion seeking a temporary restraining order and preliminary injunction," Binance.US said, adding:

”While we are disappointed by this action, we look forward to defending ourselves in court.”

Cointelegraph contacted tBinance.US for further comment but did not receive an immediate response.

The order comes the same day Coinbase was sued by the SEC for allegedly offering unregistered securities.

The SEC lawsuit alleges that Coinbase has never registered as a broker, national securities exchange or clearing agency, evading the disclosure scheme for securities markets, and has been operating as an unregistered security broker since 2019. The suit bears similarities to the one brought against Binance on June 5.

Coinbase faces suit over alleged privacy violations in biometrics collection

May 2, 2023 Coin Telegraph

biometric data

The proposed class action lawsuit alleges the exchange violated privacy laws in Illinois when it collected and stored users' fingerprints and facial scans.

Coinbase violated biometric privacy laws in Illinois through its collection and storage of customer fingerprints and facial templates, a proposed class-action lawsuit alleges.

A May 1 filing in a California District Court by a Coinbase user claimed the exchange's requirement that a customer uploads pictures of a valid ID and a self-portrait in order for the firm to conduct Know Your Customer (KYC) checks is violating certain provisions of Illinois’ Biometric Information Privacy Act (BIPA).

The lawsuit argues BIPA required Coinbase to gain permission from users when collecting their biometrics. Coinbase needed to also provide the purpose for collecting such data, how long it would be stored, how it would be used and how Coinbase would permanently destroy it.

“Coinbase had no written policy, made available to the public, establishing a retention schedule and guidelines for permanently destroying biometric information,” the suit argued.

*Coinbase user Michael Massel filed the suit on May 1, demanding a jury trial. Source:* *CourtListener*

In a similar process used by other exchanges, the suit says Coinbase scans the photographs and creates a biometric template of a user’s face. It uses the information to confirm a match between the self-portrait and the face on the supplied ID.

“Thousands” of “highly detailed geometric maps of the face” and fingerprints from Illinois residents are claimed to have been illegally collected and stored by the exchange.

Biometric authentication, such as a fingerprint or face scan, is also used on Coinbase’s mobile app to verify the user when logging into their account, the suit states.

It was alleged Coinbase’s “collection, obtainment, storage, and use” of such data is “unlawful” and exposes users “to serious and irreversible privacy risks.”

“If Coinbase’s database containing facial geometry scans or other sensitive, proprietary biometric data is hacked, breached, or otherwise exposed, Coinbase users have no means by which to prevent identity theft.”

The filing asserted that Coinbase should have “permanently destroyed” biometric data after a user opened a Coinbase account, as such information was used for the sole purpose of opening the account.

The suit is seeking damages of $5,000 per intentional BIPA violation or $1,000 if the court finds the alleged violations were not wilful along with paying the attorneys fees and court costs of the class action.

Cointelegraph contacted Coinbase for comment but did not receive a response by publication.

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