Cryptocurrency exchange Binance US and its chief executive Brian Shroder have been named in a lawsuit lodged by a US-based investor on Monday.
The investor accused Binance of falsely trumping up the value and stability of Terra USD, the token that wiped out billions worth of value from the cryptocurrency market in May.
Binance used the asset’s stablecoin status to inspire trust, the lawsuit claimed. Stablecoins are cryptocurrencies that are usually attached to the value of a FIAT currency, in this case the US dollar.
Most such currencies have demonstrated historical resilience to the price swings experienced by traditional cryptocurrency markets.
The lawsuit lodged by Utah resident Jeffrey Lockhart argues that Terra USD was pushed as a “safe” asset by both Binance US and Shroder. However, Terra USD was an “unregistered security” the plaintiff has argued. Binance has not yet registered with the US government as a securities exchange.
Lockhart is represented by Tibor Nagy, an attorney with Dontzin Nagy & Fleissig. “Binance and other exchanges were critical enablers of this devastating failure to comply with the securities laws”, he said. “Crypto exchanges made massive profits by flouting securities laws and causing real harm to real people.”
Binance has a compartmentalized structure whereby its different subsidiaries are supposedly unrelated to each other.
This enables the company to address legal challenges in independent jurisdictions without impacting its business.
Binance is also one of the few cryptocurrency exchanges that has not suspended its recruitment and pursuit of growth.
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