The United States Court of Appeals has reversed a lower court’s ruling dismissing U.S.-based users’ damages claim against Binance. Aggrieved users will once again attempt to prove that their claims do not constitute an “impermissible extraterritorial application” of U.S. securities law.
US Court of Appeals Reverses Lower Court’s Ruling in Favor of Binance
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‘Impermissible Extraterritorial Application’ of Securities Law
The U.S. Court of Appeals has revived a case wherein residents seek the revocation of contracts they entered into with Binance under Section 29(b) of the Securities and Exchange Act of 1934. The decision by the higher court means the aggrieved U.S.-based Binance users can once again attempt to prove that their claims do not constitute an “impermissible extraterritorial application” of U.S. securities law.
According to a court document, the users’ claims stem from their purchase of crypto assets like EOS, TRX, ELF, FUN, ICX, OMG, and QSP. According to the users, Binance violated U.S. federal and securities law when it sold the tokens to Americans. For those who purchased the tokens, these have “turned out to be empty promises” and many were “left holding the bag when these tokens crashed.”
This saw some of them seek legal redress at a U.S. District Court but their lawsuit was dismissed on March 31, 2022. In addition to ruling that the application of the law was illegal, the District Court judge ruled that the users were “untimely” in filing their claims.
Domestic Transactions Subject to Domestic Securities Law
The lower court’s ruling prompted the U.S.-based Binance users or the plaintiffs in the case to approach the Court of Appeals. In its judgment, the superior court ruled that the activities by Binance’s U.S.-based users qualify as domestic transactions.
“First, we conclude that [the] Plaintiffs have plausibly alleged that the transactions at issue are domestic transactions subject to domestic securities laws because the parties became bound to the transactions in the United States, and therefore irrevocable liability attached
in the United States,” the court said.
In addition, the court asserts that claims against Binance, some of which arose a year before they were filed, were brought to court well within the legally stipulated timeframe. The Court of Appeals has also labelled as “premature” the lower court’s determination that there is no connection between the users’ claims and the U.S. States whose laws govern the claims of potential absent class members.
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