The cryptocurrency world has been on a legal rollercoaster throughout 2023, following the dramatic collapse of FTX in late 2022 and the cascading bankruptcies triggered by the UST depeg.
This year, the crypto sphere has become a hotbed of legal confrontations, ranging from regulatory battles to class-action lawsuits, stirring up significant turbulence in the industry.
High-Profile Battles: SEC vs. Binance and Coinbase
The crypto industry was jolted this summer by back-to-back lawsuits filed by the Securities and Exchange Commission (SEC) against two giants: Binance and Coinbase. These suits, while sharing some accusations, differ fundamentally in their nature.
In the case against Binance, the SEC alleged that the company offered unregistered securities and mishandled customer funds.
Filed in June, the lawsuit also names Binance CEO Changpeng Zhao and associated entities like BAM Trading and BAM Management, responsible for operating Binance in the U.S.
The SEC’s main contention revolves around BNB, Binance’s native token, and BAM Trading’s staking program. Binance countered the lawsuit with a motion to dismiss, arguing the SEC’s overreach and lack of clear evidence for securities violations.
The legal battle continues as the SEC refutes these claims, invoking the major questions doctrine requiring clear congressional authorization for regulatory actions.
Coinbase faced the SEC the day after Binance, under accusations of operating as an unregistered exchange and offering securities. The SEC’s move didn’t come as a shock, given Coinbase had previously received a Wells notice.
Prior to the SEC’s action, Coinbase had initiated a lawsuit against the SEC, making this a reciprocal legal tangle.
The exchange’s argument mirrors Binance’s, citing the major questions doctrine and disputing the SEC’s authority in regulating crypto. Both Coinbase and the SEC remain entrenched in their positions, with the case still unresolved.
The Celsius Saga and More
Celsius Network’s legal troubles stand apart, with multiple agencies including the Federal Trade Commission (FTC), SEC, Commodities and Futures Trading Commission (CFTC), and the Department of Justice (DOJ) filing suits.
The charges range from unregistered and fraudulent crypto asset sales to duping customers about the safety of their deposits. A $4.7 billion settlement with Celsius was announced, though former CEO Alex Mashinsky remains a central figure in ongoing legal challenges.
Mashinsky’s motion to dismiss the FTC’s suit and the DOJ’s freezing of his assets underscore the complexity and gravity of the case.
New York’s Major Crypto Crackdown
New York Attorney General’s action against Digital Currency Group (DCG), its CEO Barry Silbert, former Genesis CEO Michael Moro, Gemini, and Genesis adds another layer to 2023’s legal narrative.
The lawsuit alleges schemes involving the Gemini Earn product, leading to substantial investor losses. Gemini, claiming to be a victim of deception by DCG and Genesis, has retaliated with its own lawsuit, while DCG expressed surprise at the NY AG’s aggressive stance.
This legal labyrinth, too, remains unresolved.
USA vs. Sam Bankman-Fried: A Spectacular Downfall
Although the charges against Sam Bankman-Fried originated in 2022, his trial in 2023 has been a focal point in the crypto legal landscape.
Found guilty on all counts of fraud, Bankman-Fried’s trial featured dramatic testimonies and unexpected courtroom moments, including dozing jurors and allegations of attempting to bribe Chinese officials with illicit means.
Bankman-Fried isn’t free from legal woes, as a 2024 trial looms over his political donations. His sentencing is yet to be determined, keeping the crypto community on tenterhooks. 2023 has indeed been a year of legal reckonings in the crypto world.
From the high-profile SEC lawsuits against Binance and Coinbase to the multifaceted legal challenges faced by Celsius and the sensational trial of Sam Bankman-Fried, the industry has been under intense scrutiny.
These cases not only highlight the growing pains of a maturing market but also underscore the urgent need for clearer regulations and robust governance in the crypto space.
As the year winds down, the outcomes of these legal battles will undoubtedly shape the future of cryptocurrency.
