A joint motion has been filed by the Binance crypto exchange and its chief executive, Changpeng Zhao, for getting the lawsuit filed by the US Securities and Exchange Commission (SEC) dismissed entirely.
The filing was submitted on September 21st with the US District Court for the District of Columbia in which Zhao and Binance asserted that the SEC was exceeding its authority.
The petition was 60 pages long and legal representatives for Zhao and Binance accused the securities regulator of not providing clear guidelines for the crypto industry before filing the lawsuit against the crypto exchange.
Therefore, they argued that the regulator was now trying to assert its regulatory authority over the crypto sector retroactively.
The filing said that in order to assert its regulatory authority, the SEC is actually distorting the securities laws itself.
It said that it was using the statutory phrase of ‘investment contract’, but only reading the word ‘contract’ from it.
In addition, it was stated that the SEC was trying to expand its jurisdiction globally by including transactions conducted on foreign crypto platforms.
The filing said that this was against the precedent established by the Supreme Court stating that the authority of the agency ends at the US border.
It was further stated in the petition that these novel theories are now being pursued by the regulator retroactively.
It now wants to impose liability for crypto assets that were sold as far back as 2017 when it had not provided any guidance to the public regarding digital assets.
Since the agency does not have the authority to do so, Zhao and Binance Holdings want the complaint to be dismissed.
BAM Trading Services is also included in the list of defendants, which is the American arm of the company that is running the Binance.US exchange.
A spokesperson for Binance said that the securities laws have been distorted by the SEC and it was now trying to regulate the crypto industry.
They said that since the SEC does not have any legitimate authority to oversee crypto exchanges, they have asked the court to dismiss the lawsuit entirely.
Back in June, the SEC had taken legal action against Binance and alleged that the company was unlawfully operating in the US and selling unregistered securities.
The SEC had also said in its initial complaint that customer funds worth billions of dollars had been commingled in an account belonging to Merit Peak.
This particular entity is under the control of Zhao. A day after filing the lawsuit, the SEC also attempted to freeze Binance’s assets to protect customer funds.
In recent weeks, the SEC has dialed up the pressure on Binance and has accused the exchange of a ‘lack of transparency’.
This move came after Binance and the SEC had made a deal for greater oversight and transparency in order to avoid freezing of assets.
One stipulation of the deal was to prevent Zhao or any entities in his control from accessing the funds.