Investors in cryptocurrencies are suing the US exchange Binance because of the collapse of Stablecoin.
Jeffrey Lockhart, a resident of Utah, is the plaintiff in a lawsuit filed against Binance and its CEO Brian Shroder. Lockhart claims in the case that Binance misrepresented Terra USD as being backed by fiat currency, when in reality it was an unregistered security.
On Monday, a U.S. investor filed a lawsuit against Binance U.S. and its CEO, alleging that the cryptocurrency exchange falsely marketed Terra USD as a safe asset prior to the so-called stablecoin’s collapse in value last month. The investor claims that Binance U.S. falsely marketed Terra USD as a safe asset.
Stablecoins are digital tokens that are tied to the value of traditional assets, such as the United States dollar. They are popular as safe havens in times of upheaval in crypto markets because they are pegged to the value of traditional assets. However, the value of Terra USD fell dramatically over the past month, causing it to violate its 1:1 dollar peg and leading to a decline in the value of other cryptocurrencies such as Bitcoin.
Jeffrey Lockhart, a resident of Utah, is the plaintiff in a lawsuit filed against Binance and its Chief Executive Brian Shroder. Lockhart claims that Binance falsely advertised Terra USD as “safe” and backed by fiat currency, when in reality it was an unregistered security. Lockhart filed the lawsuit.
According to Lockhart, the fact that Binance has not registered with the United States government as a securities exchange limits the amount of information that can be disclosed about the assets that are exchanged on the platform, which is bad for investors.
Lockhart said in his case, which was submitted to a federal court in San Francisco, that “Binance U.S. profits from every trade, and consequently has a strong incentive to sell cryptoassets regardless of their compliance with the securities laws.” Lockhart’s lawsuit was filed in federal court. “From the point of view of Binance U.S., the less disclosure that is provided, the better.” According to a spokeswoman for Binance, the cryptocurrency exchange is compliant with all of the relevant requirements and is registered with the Financial Crimes Enforcement Network (FinCEN), which is a division of the United States Treasury Department.
A spokesman for the company said in a statement that “these accusations are without merit and we will fight ourselves strongly.” The spokesperson also added that the exchange will delist Terra USD, which was a decision that was made prior to the filing of the complaint.
Lockhart is attempting to get a class action lawsuit filed on behalf of himself and other investors who purchased Terra on the Binance exchange.
The lawsuit was filed after a group of senators from both parties in the United States Senate proposed legislation last week that would shift the primary responsibility for regulating cryptocurrencies from the Securities and Exchange Commission (SEC) to the Commodity Futures Trading Commission (CFTC).
As a result of the SEC’s conclusion that crypto assets should be regarded as securities, the CFTC is usually regarded as being more favorable toward cryptocurrencies.
On Monday, the value of cryptocurrencies continued their downward trend, with Bitcoin dropping to a level not seen in 18 months and ether, the second-most popular token, falling as much as 18 percent.