On Monday, a lawsuit was filed in the Northern District of California against Binance US. It alleges that they sold unregistered securities to plaintiffs and misled them during this process.
The lawsuit stated that Binance.US’s business model is founded on the premise that they can get away with selling unregistered securities to Americans as often and wherever possible.
The plaintiffs claim that Binance’s US exchange was promoting the sale of UST and participating in airdrops, which were designed to increase trading volume.
The complaint alleges that Binance US-listed and sold USDT despite not being registered as a broker-dealer, which is against US securities law.
The Binance.US team informed reporters that Luna was never listed on their platform, and UST was delisted from the site last night.
“Binance.US is registered by FinCEN and adheres to all applicable regulations. These assertions are without merit, and we will defend ourselves vigorously,” a company spokesperson said.
This is a result of the current collapse of Terra’s UST, which almost erased more than $40 billion in value from the market overnight. In a move to compensate for the loss of funds, CEO Do Kwon distributed luna 2.0 tokens amongst holders.
The plaintiffs of this legal complaint have requested a jury trial for all bonafide matters at hand.
There is a chance that this lawsuit (brought by law firms Roche Freedman and Dontzin Nagy & Fleissig) could be the first in what will eventually become many legal complaints brought about by UST’s recent breakdown.
If successful, this could also go some way in doing what governments have been thus far unable to do: put more clear parameters around the legal status of decentralized finance (Defi) and who is accountable when something goes wrong.
A named partner at the law firm Roche Freedman, Kyle Roche, tweeted on May 13:
If you purchased $LUNA or $UST on either @coinbase @krakenfx @binance or @Gemini, please reach out to [email protected] . My firm is coordinating an effort to help those who lost funds from the recent collapse of #terra and #luna.
— Kyle Roche (@KyleWRoche) May 13, 2022