Binance, which is the biggest cryptocurrency exchange in the world, is once again at the center of a scandal.
The Moskowitz Law Firm and Boies Schiller Flexner have filed a $1 billion civil lawsuit against Binance, its CEO Changpeng Zhao, and various celebrities and influencers, including NBA player Jimmy Butler, for allegedly promoting unregistered securities and duping investors.
The lawsuit alleges that Binance paid influencers to promote the exchange, including Butler, a nationally recognized “Brand Ambassador.” The lawsuit also names YouTubers and influencers Ben Armstrong and Graham Stephan as defendants who received compensation for referring users to Binance.
According to the lawyers who filed the lawsuit, Binance partnered with these influencers to promote the exchange and solicit new customers through traditional advertisements on television and social media.
The lawyers allege that Binance could not have achieved its great heights without the massive impact of these influencers, who hyped unregistered securities for payments of millions of dollars. The suit seeks $1 billion in damages after a year-long investigation.
The lawsuit was filed just days after the Commodity Futures Trading Commission (CFTC) separately filed suit against Binance, alleging that the company violated trading and derivatives regulations.
This is not the first time Binance has come under scrutiny for its sales tactics. Last year, the exchange faced backlash for allegedly creating fake trading volumes to attract users.
The lawsuit explicitly mentions Binance’s native token, BNB, which has a market cap of $48.8 billion and is the fourth largest digital asset.
The suit claims that BNB’s “burn rate,” the number of tokens taken out of circulation, is determined by Zhao, representing a classic example of a centralized exchange, which is promoting the sale of an unregistered security.
US authorities have increasingly been monitoring Binance and its operations. The exchange’s involvement with unregistered securities and its use of influencers to attract investors are concerning to regulators.
This latest lawsuit is likely to be a major blow to Binance’s reputation and could have serious financial implications if the allegations are proven true.