Breaking: Paxos facing SEC lawsuit over Binance USD — Report

The US Securities and Exchange Commission (SEC) has reportedly told stablecoin issuer Paxos Trust Co. that it plans to sue the firm for violating investor protection laws with respect to Binance USD (BUSD).

As reported on February 12 report In The Wall Street Journal, citing people familiar with the matter, the SEC issued a Wells notice to Paxos, a letter the regulator uses to inform companies of planned enforcement actions.

According to people, the notice claims that Binance USD is an unregistered security.

According to According to Investopedia, once Wells’ notice is received, the defendant is given 30 days to respond with a legal brief known as the Wells Submission, which includes arguments proving why charges should not be brought against potential defendants.

Cryptooshala contacted Paxos, Binance, and the SEC for comment but received no immediate response.

Paxos is the owner and issuer of BUSD, a stablecoin backed by the US dollar, which has been around since the firm partnered with crypto exchange Binance in September 2019. It is the third largest stablecoin with a market capitalization currently exceeding $16 billion.

Paxos is also the creator of the Paxos Dollar (USDP) stablecoin, which was launched in 2018, and is also behind the itBit digital asset exchange, which it launched in 2012 with the founding of Paxos.

Coinbase Will ‘Likely Defend’ Staking in US Courts, Says CEO

The reported action is the SEC’s latest move in its apparent crackdown on cryptocurrency-related firms.

On Feb. 9, the regulator announced a $30 million payout to crypto exchange Kraken for failing to register its cryptocurrency staking program, which the SEC claimed was a security. Following this, SEC Chairman Gary Gensler warned crypto firms to “come and obey the law.”

The SEC has faced criticism from its staff for its actions against Kraken. On Feb. 10, SEC Commissioner Hester Pierce said the SEC’s behavior “is not an effective or fair way to regulate,” criticizing its own agency for shutting down “a program that has served the people well.”

Reports also surfaced last week that the New York City Department of Financial Services (NYDFS) is investigating Paxos, however the exact motives for the investigation are currently unclear.

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