Crypto investor sues Binance US exchange over stablecoin collapse
An American investor claims that crypto exchange Binance US falsely marketed stablecoin TerraUSD as a safe investment.
US and its CEO Brian Shroder were named as defendants in a lawsuit claiming that the crypto exchange falsely marketed the safety of stablecoin TerraUSD (UST), which collapsed in spectacular fashion earlier this year.
Reported by Reuters, American citizen Jeffrey Lockhart claims that Binance US marketed UST as a stablecoin, with a value pegged 1:1 to the US dollar, but in reality it was just an unsecured and unofficial security.
UST's collapse was linked to lack of assets backing the 1:1 peg with the dollar, and has led to governments worldwide looking to regulate stablecoin tokens.
Earlier this month, a bipartisan bill was proposed to regulate cryptocurrencies in the US, with a section stating that stablecoin providers would have to be transparent about their liquid asset holdings.
"Binance and other exchanges were critical enablers of this devastating failure to comply with the securities laws," said Tibor Nagy of law firm Dontzin Nagy & Fleissig, who represent Lockhart.
"Crypto exchanges made massive profits by flouting securities laws and causing real harm to real people."
Lockhart said Binance US's failure to register with the US government as a securities exchange limited its requirement to disclose information about assets on the platform, thereby harming investors.
Binance US is already under investigation by US authorities for links to global crypto exchange Binance, amid speculation of insider trading between employees of the two linked entities.
Edited by Teja Lele
