Binance, the world’s largest crypto exchange company, has questioned the regulatory boundaries of the US Commodities Futures Trading Commission (CFTC) in an attempt to dismiss the lawsuit brought against it by the commodities regulator.
In motions filed on Thursday, July 27, defendants Changpeng Zhao (CZ), former chief compliance officer Samuel Lim, and three foreign Binance entities asked the court to drop the lawsuit claiming that CFTC has no jurisdiction over many of the charges it levied against the company.
Binance and its co-founder CZ asked a federal judge to dismiss a lawsuit filed by the CFTC https://t.co/gbJwge5YVF
— Bloomberg Crypto (@crypto) July 28, 2023
CFTC is Stretching Beyond Authority, Says Binance
Binance Motion uses strong language at the outset to prove that CFTC is stretching beyond its circle of authority in suing the exchange. The introductory paragraph reads:
“It is a bedrock principle of our legal order that, as a general rule, “United States law governs domestically but does not rule the world.” […] 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.”
The defendants’ 49-page brief urges the court to drop counts one through six of the CFTC complaint as they are “impermissibly extraterritorial” and are “based on statutes and regulations that do not apply to the foreign conduct.”
Finally, Binance claimed that Count VII, which accuses the exchange of willful evasion of the US commodities exchange act (CEA), should also be dropped as the CFTC “never before brought a claim under this provision” but “chosen to test this anti-evasion claim for the first time against a novel industry and products that did not even exist and were not remotely contemplated in 2012 when the regulation was promulgated.”
As Wealth Growth Insights reported, on July 24, the lawsuit defendants filed an application to exceed the 15-page limit for the response to the CFTC complaint to accommodate two separate motions that would seek the dismissal of the lawsuit. According to the application, Samuel Lim was to file a separate motion.
A 17-page memorandum in support of Lim’s motion to dismiss the charges against him reads:
“What little the complaint says about Mr. Lim relates to things he is supposed to have done or failed to do abroad. None of those allegations make the necessary link between Mr. Lim, this country, and this case.”
The US CFTC sued Binance in March 2023 for operating an unregistered derivates exchange and other commodities law violations. On the other hand, the US SEC has also hammered the company with a lawsuit for allegedly operation an unregistered securities exchange.
The motion to dismiss is a standard tactic in the US used by defendants and very rarely results in charges being dropped over technical issues. Only time will tell how this goes for Binance. The initial hearing in the case was scheduled on Thursday but was waived by the judge due to the filings presented.
