Economy News

Binance U.S. exchange sued by crypto investor over stablecoin collapse

By Luc Cohen

NEW YORK (Reuters) – Binance U.S. and its CEO were sued on Monday by a U.S. investor who alleges the cryptocurrency exchange falsely marketed Terra USD as a safe asset ahead of the so-called stablecoin’s collapse in value last month.

Stablecoins are digital tokens pegged to the value of traditional assets, such as the U.S. dollar, and are popular as safe havens in times of turmoil in crypto markets. But Terra USD’s value plunged last month, breaking its 1:1 dollar peg and contributing to a tumble in other crypto assets like Bitcoin.

In the lawsuit against Binance and Chief Executive Brian Shroder, Utah resident Jeffrey Lockhart said Binance falsely advertised Terra USD as “safe” and backed by fiat currency, when in fact it was an unregistered security.

Lockhart said Binance’s failure to register with the U.S. government as a securities exchange limits disclosure about assets traded on the platform, harming investors.

“Binance U.S. profits from every trade, and therefore has a stark incentive to sell cryptoassets irrespective of their compliance with the securities laws,” Lockhart wrote in his lawsuit, filed in San Francisco federal court. “From Binance U.S.’s perspective, the less disclosure, the better.”

A Binance spokesperson said the exchange is registered with FinCEN – a financial industry self-regulation group – and complies with all applicable regulations.

“These assertions are without merit and we will defend ourselves vigorously,” the spokesperson said in a statement, adding that the exchange will delist Terra USD, a decision made before the lawsuit was filed.

Lockhart is seeking to have himself and other investors who bought Terra on Binance registered as a class.

The lawsuit comes after a bipartisan group of U.S. Senators last week proposed legislation to have the Commodity Futures Trading Commission (CFTC), not the Securities and Exchange Commission (SEC), play the primary role in regulating crypto.

The CFTC is generally seen as friendlier toward cryptocurrencies, as the SEC has found crypto assets should be seen as securities.

Cryptocurrencies continued their slide on Monday, with Bitcoin touching an 18-month low and No. 2 token ether tumbling as much as 18%.

Source:reuters

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