Securities Fraud

Binance Faces Class Action Lawsuit Over Alleged Cryptocurrency Fraud

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Binance Faces Class Action Lawsuit Over Alleged Cryptocurrency Fraud

In a complex web of allegations, Nir Lahav has initiated a class-action lawsuit against Binance Holdings Limited, BAM Trading Services Inc., BAM Management US Holdings Inc., and Changpeng Zhao. The lawsuit alleges fraudulent and anti-competitive practices that led to significant financial losses for Lahav and others.

The story begins with Binance's investment in a competitor, FTX Entities, and its cryptocurrency token, FTT. According to the complaint, Binance later engaged in a bait-and-switch tactic, causing the collapse of FTX's native token. The lawsuit alleges that Binance and its CEO, Changpeng Zhao (known as CZ), made false and misleading statements on social media platforms, manipulating the market and causing the price of FTT to decline. "Defendants publicly disseminated information to hurt FTX Entities, leading to its bankruptcy filings," the complaint reads. These actions, according to the lawsuit, were part of a broader strategy to monopolize the cryptocurrency platform market and gain control over lobbying efforts in the US for cryptocurrency.

The lawsuit alleges violation of several laws and regulations, including the Securities Exchange Act and SEC's Rule 10(b)(5), which prohibit fraudulent activities in connection with the purchase or sale of securities. The defendants are also accused of violating SEC Section 17(a), which makes it unlawful to engage in fraudulent or deceitful practices in the offer or sale of securities.

In addition, the lawsuit claims violations of California's Unfair Competition Law, which prohibits any unlawful, unfair, or fraudulent business act or practice. The defendants are also charged with violating [California Corporations Code §25504.1](https://codes.findlaw.com/ca/corporations-code/corp-sect-25504-1/#:~:text=Any%20person%20who%20materially%20assists,3%20(commencing%20with%20Section%2025120), which holds liable those who assist in making false statements in the sale of a security. The lawsuit further alleges negligent and intentional misrepresentation by the defendants. Lahav and others claim that they were misled by the defendants' actions and statements, leading to significant financial losses. "Plaintiff and the Class seek compensation for the loss of assets deposited or invested through FTX trading platforms," the complaint states. The lawsuit does not specify the exact amount of damages sought but indicates that it is substantial, considering the number of people affected and the scale of the alleged fraud.

The class of plaintiffs represents all persons or entities in the United States who had any fiat or cryptocurrency deposited or invested through an FTX trading platform during the relevant time period. The case promises to be a significant one, shedding light on the operations of major players in the cryptocurrency market and potentially setting precedents for future litigation in this rapidly evolving field.

Case Facts

  • Status:
    Lawsuit Filed
  • Case Number:
    3:23-cv-05038
  • Filing Date:
    October 2, 2023
  • Jurisdiction:
    U.S. District Courts
  • State:
    California
  • Court:
    California Northern District
  • Plaintiff:
    Nir Lahav
  • Defendant:
    Binance Holdings Limited; BAM Trading Services Inc.
  • Plaintiff Firm:
    Devlin Law Firm LLC
  • Defendant Firm:
  • Claims Administrator:
Contributors
Kevin Salzman, Esq.
Kevin Salzman, Esq.
Reporter and Licensed Attorney
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