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(Reuters) — Binance U.S. and its CEO were sued on Monday by a U.S. investor who alleges the cryptocurrency exchange falsely marketed Terra USD as a safe asset ahead of the so-called stablecoin’s collapse in value last month.
Stablecoins are digital tokens pegged to the value of traditional assets, such as the U.S. dollar, and are popular as safe havens in times of turmoil in crypto markets. But Terra USD’s value plunged last month, breaking its 1:1 dollar peg and contributing to a tumble in other crypto assets like Bitcoin.
In the lawsuit against Binance and Chief Executive Brian Shroder, Utah resident Jeffrey Lockhart said Binance falsely advertised Terra USD as “safe” and backed by fiat currency, when in fact it was an unregistered security.
Mr. Lockhart said Binance’s failure to register with the U.S. government as a securities exchange limits disclosure about assets traded on the platform, harming investors.
“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, which represents Mr. Lockhart. "Crypto exchanges made massive profits by flouting securities laws and causing real harm to real people."
A Binance spokesperson said the exchange is registered with the Financial Crimes Enforcement Network - a unit of the U.S. Treasury Department - and complies with all applicable regulations.
“These assertions are without merit and we will defend ourselves vigorously,” the spokesperson said in a statement, adding that the exchange will delist Terra USD, a decision made before the lawsuit was filed.
Mr. Lockhart is seeking to have himself and other investors who bought Terra on Binance registered as a class.