Binance.US under criticism after UST affair
On Monday, the law firm Roche Freedman LLP filed a class action lawsuit in a California court, against Binance.USabout the collapse of the UST. Indeed, a group of investors, considering themselves aggrieved, are taking legal action against the American branch of Binance and its CEO, Brian Schroder.
This complaint is built around two main axes. For one, the fact that Binance. unrecorded titles through the stablecoin UST and on the other hand, that ads made in this regard were misleading.
Example of advertisement issued by Binance
It is therefore the specific secure nature of the UST which is deemed misleading by the patient group. The document presented by the law firm goes back to emotional and financial distress caused by the crash of the Terra ecosystem on retail investors.
Additionally, through its investment in the project through Binance Labs, the link between the two entities is also blamed on the exchange. It is also called into question the fact that the platform receives transaction fees on its products, regardless of the direction of the market, as well as an interest in advertising.
Of course, all these financial losses are to be deplored and the event is certainly a disaster. But it is also worth remembering that when it comes to investing, everyone is supposed to act in his soul and conscienceand be able to take responsibility for any losses.
Moreover, the vast majority of the ecosystem was caught off guard in this matter and even the biggest platforms lost a lot. Binance’s investment in Terra, which was valued at $1.6 billion, has almost evaporated, as mentioned by its CEO and founder, Changpeng Zhao (CZ), on May 17:
— CZ 🔶 Binance (@cz_binance) May 17, 2022
👉 To go further – Watch our video on the collapse of the Terra ecosystem
The case of UST as an unregistered title
Beyond the marketing dimension, Binance.US is also accused of marketer of unregistered financial securities to the American public. The complaints group thus argues that the platform is not in compliance with the Security and Exchange Commission (SECOND).
For the case of the UST, reference is made to the Howey test, which called it a financial security. In short, to meet this criterion, a financial vehicle must, for example:
- Ask for a silver investment;
- Allow a possible profit;
- Representing an investment in a joint venture;
- Seeing one’s performance linked to the actions of others.
If the first two points are rather obvious, it is worth clarify the other two. The character of investment in a joint venture is argued by the fact that Terra was financed by different investors. As mentioned in the white paper of the blockchain, the pooling of these funds should allow the ecosystem to develop.
Moreover, the performance of the UST or at least its anchoring to the dollar depended, according to the patients, on Terraform Labs. Indeed, it is illustrated by the arbitration system set up to this end, encouraging investors to participate in the process through financial compensation. It is also explained that the owners of UST were entitled to expect actions, from Terra, so that the course does not collapse.
However, there is no guarantee that Binance.US and its CEO Brian Schroder think anything about this UST complaint. But it is still interesting to observe that following these events, different parties looking for culprits to justify the losses produced.
What is certain is that one way or another, all this will have legal consequences. Whether through the various regulatory processes or court decisions against certain players in the ecosystem.
👉 Also in the News – Bitcoin (BTC) Withdrawal Temporarily Halted on Binance Following “Stuck Transaction”
Source: Legal action
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