lawsuit

Former LDO holder files class-action lawsuit against Lido DAO for crypto losses

The investor claimed that 64% of LDO tokens are controlled by just a few venture capital firms, preventing ordinary investors from having any control over decisions.

An LDO holder initiated a class-action lawsuit against the governing body for liquid staking protocol Lido, according to a complaint filed in a San Francisco United States District Court on Dec. 17. The lawsuit alleges that Lido’s LDO token is an unregistered security and that the Lido decentralized autonomous organization (Lido DAO) is liable for plaintiffs’ losses from the token’s price decline.

Lido is a liquid staking protocol that allows users to delegate their Ether (ETH) to a network of validators and earn staking rewards while also holding a derivative token called stETH that can be used in other applications. It is governed by holders of LDO, which collectively form Lido DAO.

The lawsuit was filed by Andrew Samuels, who resides in Solano County, California, the document states. The defendants are Lido DAO, as well as venture capital firms Paradigm, AH Capital Management, Dragonfly Digital Management and investment management company Robert Ventures. The document alleges that 64% of LDO tokens “are dedicated to the founders and early investors like [these defendants],” and therefore, “ordinary investors like Plaintiffs are unable to exert any meaningful influence on governance issues.”

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Jane Street, Tower Research and Radix are Binance’s ‘VIP’ clients in CFTC suit: Report

The firms were cited anonymously in the CFTC’s complaint describing Binance’s alleged facilitation of U.S. clients.

Trading firms Jane Street Group, Tower Research Capital and Radix Trading have been reportedly identified as Binance’s three “VIP” clients that were anonymously cited in the recent lawsuit filed against Binance by the United States commodities regulator.

According to an April 5 Bloomberg report citing “people familiar with the matter,” Radix Trading is “Trading Firm A” as described in the Commodities Futures Trading Commission’s (CFTC) suit, while Jane Street was “Trading Firm B” and Tower Research was “Trading Firm C.”

The firms on the CFTC’s list were examples of U.S. clients allegedly able to access Binance.

The Wall Street Journal (WSJ) first reported on March 28 that Radix Trading was “Trading Firm A.”

Radix co-founder Benjamin Blander told the WSJ in a March 30 report that he believed the firm acted legally even when trading with Binance’s offshore entity.

The claimed “VIP” treatment from Binance included lower transaction fees and faster trading services, the CFTC said in the filing. The firms provided Binance with liquidity on the exchange, and Binance gained the corresponding trading fee revenues.

It was part of a strategy that “actively facilitated violations of U.S. law” by helping U.S. trading firms evade Know Your Customer compliance standards, among other things, the CFTC alleged.

Binance allegedly enabled Radix to sidestep compliance controls by providing them information on accessing Binance.com through a virtual private network to obscure its IP address.

Related: Dubai regulator demands Binance provide info on ownership, governance: Report

The CFTC claimed the trading violations to have come about as Binance prioritized “commercial success over compliance with U.S. law.”

However, Binance CEO Changpeng “CZ” Zhao vehemently denied the claims of compliance and market manipulation violations in a follow-up post on March 28.

Magazine: US enforcement agencies are turning up the heat on crypto-related crime

7 details in the CFTC lawsuit against Binance you may have missed

Within the 74-page complaint, the CFTC has labeled Ether, Binance USD, Tether and Litecoin as commodities along with Bitcoin, and made a few other startling claims.

The surprise lawsuit from the Commodity Futures Trading Commission against crypto exchange Binance sent shock waves across the markets on March 27. 

In addition to allegations that Binance manipulated markets and lacked compliance efforts, the regulator has also accused the exchange of not cooperating with investigative subpoenas and obscuring the location of its executive offices. Binance has rejected many of the allegations.

However, the devil is in the details when it comes to the 74-page complaint. Here are a few interesting snippets you may have missed.

Tokens labeled as commodities

Contrary to assertions by the United States Securities and Exchange Commission chief Gary Gensler on crypto assets, the latest CFTC lawsuit has labeled Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Tether (USDT), and Binance USD (BUSD) as commodities.

Earlier this year, the SEC argued that BUSD is an “unregistered security” in its Wells notice against Paxos. Gensler on many occasions has also argued that virtually all crypto assets are securities, with the exception of Bitcoin.

Sheila Warren, CEO of the Crypto Council for Innovation, said the statement is a “powerful shot across the bow of the SEC” and could have significant implications for the industry and for which regulator will have ultimate authority.

Meanwhile, Coinbase Chief Legal Officer Paul Grewal criticized the lack of agreement between the two U.S. regulators, stating:

“A security can apparently also be a commodity, except when it’s not. And it depends on which regulator you ask, and when. If you’re confused, you are not alone. Is this really the best American law has to offer?”

CZ’s phone was accessed

Binance CEO Changpeng Zhao has been named as a defendant and has been repeatedly singled out throughout the complaint.

Interestingly, the CFTC stated it was been able to gather evidence by collecting Signal text chains and group chats from “Zhao’s telephone.” Many are now wondering how this was possible.

“Zhao has communicated over Signal with the auto-delete functionality enabled with numerous Binance officers, employees, and agents for widely varying purposes,” the CFTC said.

Terrorist activity accusations

Another startling allegation from the commodities regulator accuses the firm’s employees of knowing that its platform had facilitated “illegal activities.”

“Internally, Binance officers, employees, and agents have acknowledged that the Binance platform has facilitated potentially illegal activities.”

It specifically referred to a February 2019 incident in which former compliance chief Samuel Lim received information “regarding HAMAS transactions.” According to the filing, Lim explained to a colleague that terrorists usually send “small sums” as “large sums constitute money laundering.”

Excerpt from CFTC lawsuit. Source: District Court of Northern District of Illinois

One man at the top

According to the complaint, the CFTC has alleged Zhao owned and controlled dozens of entities that operate the Binance platform as a “common enterprise.”

It cited an example of the CEO personally approving minor office expenses and paying for company services such as Amazon Web Services with his own personal credit card.

Excerpt from CFTC lawsuit. Source: District Court of Northern District of Illinois

VIP program perks

Meanwhile, a Binance “VIP” program with preferential rates and perks has also been scrutinized by the regulator.

In addition to allegedly encouraging customers to use virtual private networks (VPNs) to access the platform, the CFTC also alleged that part of the perks for VIP customers was that they were given “prompt notification” of any law enforcement inquiry about their account.

Excerpt from CFTC lawsuit. Source: District Court of Northern District of Illinois

“Zhao wanted U.S. customers, including VIP customers, to transact on Binance because it was profitable for Binance to retain those customers,” it alleged.

Ignoring U.S. regulatory requirements

The CFTC also accused Binance of being aware of U.S. regulatory requirements but ignoring them and making “deliberate, strategic decisions to evade federal law.”

The filing goes back to internal messages between Binance executives in 2018 regarding its strategy for the U.S. exchange and complying with sanctions imposed by regulators for the global exchange.

Excerpt from CFTC lawsuit. Source: District Court of Northern District of Illinois

Fines and injunctions

Toward the end of the document, the commodities regulator said it is seeking monetary penalties, disgorgement of any trading profits, salaries, commissions, loans, or fees gained from their purportedly wrongful actions, along with paying penalties to resolve the investigations.

It also orders a permanent injunction against further violations.

Related: Binance CEO CZ rejects allegations of market manipulation

The CFTC “doesn’t waste its time on jabs — it goes straight for the knockout,” said Warren from the Crypto Council for Innovation.

Binance has already rejected a number of allegations and claims from the commodities regulator, hinting that a more in-depth response is incoming. 

On March 28, CZ responded to what he termed an “unexpected and disappointing civil complaint,” stating that the company has cooperated with the CFTC for the past two years.

In comments to Cointelegraph, a spokesperson from Binance maintained that the exchange maintains country blocks for U.S. citizens, regardless of where they live in the world.

“Consistent with regulatory expectations globally, we have implemented a robust ‘three lines of defense’ approach to risk and compliance, which includes, but is not limited, to:

  • Ensuring mandatory KYC for all users worldwide
  • Maintaining country blocks for anyone who is a resident of the U.S.
  • Blocking anyone who is identified as a U.S. citizen, regardless of where they live in the world
  • Blocking for any devices using a U.S. cellular provider
  • Blocking log-ins from any U.S. IP address
  • Preventing deposits and withdrawals from U.S. banks for credit cards.”

Breaking: Binance CEO CZ rejects allegations of market manipulation

Changpeng ‘CZ’ Zhao has refuted claims made by the Commodities Futures and Trading Commission in its March 27 complaint against Binance.

Binance CEO Changpeng “CZ” Zhao has rejected allegations from the Commodities Futures and Trading Commission, arguing that the crypto exchange “does not trade for profit or ‘manipulate’ the market under any circumstances.”

In a March 28 blog post, the chief executive responded to the CFTC’s lawsuit accusing Binance and CZ of engaging in improper compliance procedures and trading, calling the allegations “an incomplete recitation of facts.”

In its complaint, the CFTC alleged that Binance has traded on its own platform using 300 “house accounts” and did not make the proper disclosures to its customers that it was trading in its own market in its Terms of Use.

The CFTC has also accused Binance of keeping the information a “top secret” and alleged that the exchange refused to respond to commission-issued investigative subpoenas seeking information on its trading activity.

“On information and belief, Binance has not subjected the trading activity of Merit Peak, Sigma Chain, or its approximately 300 house accounts to any anti-fraud or anti-manipulation surveillance or controls,” the statement added.

Excerpt from the March 27 CFTC complaint. Source: U.S. District Court

However, CZ argued that while Binance “trades” in a number of situations, this is mainly to convert its crypto revenue to cover expenses in fiat or other cryptocurrencies.

“Personally, I have two accounts at Binance: one for Binance Card, one for my crypto holdings. I eat our own dog food and store my crypto on Binance.com. I also need to convert crypto from time to time to pay for my personal expenses or for the Card,” he added.

CZ also refuted claims that his staff engaged in “insider trading,” stating that Binance has a 90-day no-day-trading rule for employees, adding: 

“This is to prevent any employees from actively trading. We also prohibit our employees from trading in Futures.”

He went further to state that employees are restricted from buying or selling coins where they’ve obtained “private information” about them.

“I observe these policies myself strictly. I also never participated in Binance Launchpad, Earn, Margin, or Futures. I know the best use of my time is to build a solid platform that services our users,” he added.

Zhao called the recent CFTC filing both “unexpected and disappointing,” as it had been working cooperatively with the regulator for over two years.

The CFTC also alleged that senior members of the firm have “actively facilitated violations of U.S. law,” including “assisting and instructing” U.S. customers on ways to evade Binance’s own compliance controls, adding that Binance’s compliance program was just “For Show.”

Related: CFTC calls ETH a commodity in Binance suit, highlighting the complexity of classification

However, CZ denied being lax in compliance efforts. He stated that Binance.com has developed “best-in-class” technology to ensure compliance and currently has more than 750 people working to ensure the business operates within the bounds of Anti-Money Laundering (AML) and Know Your Customer (KYC) laws:

“To date, we have handled 55,000+ LE requests, and assisted US LE freeze/seize more than $125 million in funds in 2022 alone and $160 million in 2023 so far.”

CZ also pointed out that Binance.com holds 16 licenses to offer digital asset trading services, the most of any cryptocurrency trading platform.

Magazine: Crypto winter can take a toll on hodlers’ mental health

Yield platform Stablegains sued for promoting UST as a ‘safe’ investment

The now-shuttered stablecoin yield platform is being sued for customer losses after allegedly funneling customer funds into Anchor Protocol without users’ knowledge or consent.

Decentralized finance yield platform Stablegains has been sued in a Californian court for allegedly misleading investors and failing to comply with securities laws.

On Feb. 18, plaintiffs Alec and Artin Ohanian filed a complaint in the U.S. District Court for the central district of California, alleging that the shutteredDeFi platform diverted all of its customer funds to the Anchor Protocol without their knowledge or consent.

Anchor Protocol offered yields of up to 20% on the Terraform Labs algorithmic stablecoin, Terra USD (UST).

“As an early supporter of and investor in TFL [Terraform Labs], Stablegains is intimately familiar with UST and LUNA. In fact, Stablegains, Inc. falsely advertised UST as a safe investment.”

Stablegains offered a 15% gain for its customers, pocketing the difference from yields offered by Anchor Protocol.

The plaintiffs also allege that UST was a security and that Stablegains broke federal securities laws:

“Stablegains plainly failed to comply with federal and state securities laws. Stablegains failed to disclose that UST is in fact a security.”

The complaint added that the firm failed to register with the U.S. Securities and Exchange Commission either as a securities exchange or as a broker-dealer.

The Ohanians stated that there were “disastrous consequences for Stablegains’ customers,” following the collapse of the UST ecosystem in May. UST de-pegged from the dollar, causing a broader run on DeFi and crypto markets in May and an eventual loss of around $18 billion from the Terra/Luna ecosystem.

Following the collapse, Stablegains allegedly altered its website and promotional material touting UST as “safe” and “fiat-backed,” effectively conceding that UST was none of those things, the complaint stated.

Instead of liquidating assets and returning funds to customers, Stablegains “retained the majority of the devalued assets deposited by its users, unilaterally opting to redirect them into Terra 2.0,” it added.

Stablegains, which launched in August 2021, shut down on May 22. It discontinued its services, apps and support for Anchor Protocol, requesting that users withdraw their funds. As reported by Cointelegraph, Stablegains was hit with a similar lawsuit at the time.

Related: SEC sues Do Kwon and Terraform Labs for fraud

The specific amount sought in damages was not detailed, however, the plaintiffs did demand a trial.

On Feb. 16, the SEC filed a lawsuit against Terraform Labs and its founder, Do Kwon, for allegedly “orchestrating a multi-billion dollar crypto asset securities fraud.”

Breaking: SEC sues Do Kwon and Terraform Labs for fraud

“We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities,” said SEC chair Gary Gensler.

The United States Securities and Exchange Commission has filed a lawsuit against Terraform Labs and its founder, Do Kwon, for allegedly “orchestrating a multi-billion dollar crypto asset securities fraud.”

In a Feb. 16 statement, the SEC said that Kwon and Terraform offered and sold an “inter-connected suite of crypto asset securities, many in unregistered transactions.” The agency pointed to Terraform Labs’ now-collapsed algorithmic stablecoin, TerraClassicUSD (USTC), and its connected cryptocurrency, Terra Luna Classic (LUNC).

The SEC also took issue with mAssets, crypto derivatives that mirror the stock price of publicly listed companies, and Terraform’s issuance of Mirror (MIR), a governance token for the Mirror protocol that lists mAssets.

SEC chair Gary Gensler said in a statement that Kwon and Terraform “failed to provide the public with full, fair, and truthful disclosure,” particularly for USTC and LUNC, which were formerly named Terra (LUNA) and TerraUSD (UST). Gensler added:

“We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”

The SEC filed a 55-page complaint in the U.S. District Court for the Southern District of New York with charges relating to violations of the registration and anti-fraud provisions of the Securities Act and the Exchange Act.

In the complaint, the SEC said that Terraform and Kwon “touted and marketed” its Anchor Protocol, which at one point was advertised to pay out 20% interest on USTC deposits. It also alleged Terraform and Kwon misled investors about the stability of Terra’s stablecoin.

Related: Korean e-commerce exec accused of accepting LUNA for shilling Terra Labs

Last May, USTC lost its peg to the U.S. dollar, causing its price — and the price of LUNC — to effectively collapse to zero. This resulted in a wider collapse in the digital asset market that wiped out an estimated value of $40 billion.

A one-year chart of USTC’s price showing the rapid depeg event in May. Source: Coingecko

Gensler commended the SEC’s staff on their investigation, adding: “The defendants attempted to prevent us from obtaining important information about their business.”

“This case demonstrates the lengths to which some crypto firms will go to avoid complying with the securities laws,” he added.

Kwon, a South-Korean national, is currently at large and believed to be in Serbia after leaving his residence in Singapore sometime in September following a Seoul court issuing an arrest warrant for him. Interpol reportedly issued a Red Notice for Kwon to law enforcement worldwide later in September.

Kwon has denied he’s hiding from authorities and Terraform have claimed South Korea’s case against Kwon is “highly politicized.”

Cointelegraph contacted Terraform Labs for comment but did not receive an immediate response. Do Kwon could not be reached for comment.

Mango Markets exploiter seeks to keep disputed funds paid as ‘bug bounty’

Attorneys representing Avraham Eisenberg argued he had already settled his dispute with Mango DAO and shouldn’t have to pay back any more funds.

The alleged exploiter of the decentralized finance protocol Mango Markets, Avraham Eisenberg, is seeking to keep his share of crypto gained from his so-called “highly profitable trading strategy.”

On Feb. 15, attorneys for Eisenberg filed a motion in a New York District Court objecting to a lawsuit from Mango that asks for $47 million in damages plus interest starting from the time of Eisenberg’s October attack, whidrained around $117 million from the protocol.

The lawyers argued that Eisenberg shouldn’t need to pay back any more funds to the DeFi platform due to a settlement agreement that he reached with Mango DAO, arguing that the “matter was settled.”

Eisenberg’s (right) last public appearance was on a podcast in late October, just weeks after his alleged exploit of the platform. Source: YouTube

A governance proposal was passed by the Mango DAO following the draining of its treasury that saw Eisenberg keep a portion — $47 million — of the pilfered funds as a bug bounty along with a stipulation that Mango wouldn’t pursue legal action.

“Eisenberg transferred funds totaling approximately $67 million to Mango Markets,” the attorneys wrote, adding:

“Weeks later, eligible Mango Markets’ members received reimbursement from the Mango Markets treasury. At that point, all involved considered this matter closed and Mr. Eisenberg heard nothing further from Mango Markets.”

Mango, however, said in its suit that the settlement should be voided as it was made “under duress” and alleged Eisenberg “was not engaged in lawful bargaining.”

Eisenberg’s attorneys rebuffed these claims, saying the “improper three-month delay” for Mango filing its suit “undermines any alleged irreparable harm.” The lawsuit, they say, aimto “take advantage” of Eisenberg’s December arrest in Puerto Rico by United States authorities.

Related: Alleged Mango Markets exploiter waives bail during hearing in federal court

Eisenberg was charged by the Federal Bureau of Investigation with commodities fraud and manipulation.

He also faces a lawsuit from the U.S. Commodity Futures Trading Commission that alleges market manipulation and a suit from the Securities and Exchange Commission for violating securities laws relating to anti-fraud and market manipulation.

Eisenberg has previously stated his trades on Mango were “legal open market actions, using the protocol as designed,” and called his purported attack a “highly profitable trading strategy.”

SBF and FTX fraud ‘aided and abetted’ by Silvergate Bank, alleges lawsuit

The filing is the latest proposed class action in a string of lawsuits aimed at Silvergate over the last two months about its links with Sam Bankman-Fried and defunct crypto exchange FTX.

Silvergate Bank and its CEO Alan Lane have been accused of “aiding and abetting” a “multibillion-dollar fraudulent scheme orchestrated by Sam Bankman-Fried (SBF)” and two of his entities, FTX and Alameda Research, in a newly proposed class-action lawsuit.

The proposed class-action lawsuit was filed in the United States District Court for the Northern District of California on Feb. 14 by lawyers representing a San Francisco-based FTX user who was frozen out of around $20,000 in crypto when the exchange collapsed last year.

Plaintiff Soham Bhatia alleges that Silvergate Bank, its parent company Silvergate Capital Corporation and CEO Alan Lane were aware of the use of FTX customer funds by Alameda Research and has accused them of concealing “the true nature of FTX” from its customers.

“At all relevant times, Silvergate, Bankman-Fried and Lane were each co-conspirators of the other,” according to the lawsuit, adding:

The lawsuit alleges Silvergate and Lane aided, abetted, encouraged and substantially assisted Bankman-Fried in jointly perpetrating a fraudulent scheme upon Plaintiff and the class.

“By aiding, abetting, encouraging and substantially assisting the wrongful acts, omissions and other misconduct alleged above, Defendants acted with an awareness of their wrongdoing and realized that their conduct would substantially aid the accomplishment of their illegal design.”

The suit seeks a combination of damages, restitution and disgorgement of profits with the amount to be determined in trial.

However, the lawsuit is yet to be certified by the district court, which is a necessary step before it can proceed as a class action.

Related: Crypto bank Silvergate ranks as the second- most-shorted stock on Wall Street

The latest proposed lawsuit is just another class-action complaint against Silvergate over the last two months.

On Dec. 14, plaintiff Joewy Gonzalez filed a similar class-action suit in the U.S. District Court for the Southern District of California — accusing Silvergate of its alleged role in “furthering FTX’s investment fraud” by aiding and abetting the crypto exchange when it placed FTX user deposits into the bank accounts of Alameda.

On Jan. 10, a class-action suit was filed against Silvergate Capital Corporation in the United States District Court of Southern California alleging that Silvergate’s platform failed to detect occurrences of money laundering “in amounts exceeding $425 million” involving South American money launderers.

Other companies have also been accused of similar wrongdoings. 

Last week on Feb. 6, algorithmic trading firm Statistica Capital filed a putative class-action lawsuit against New York-based Signature Bank, alleging it had “actual knowledge of and substantially facilitated the now-infamous FTX fraud.”

“In particular, Signature knew of and permitted the commingling of FTX customer funds within its proprietary, blockchain-based payments network, Signet,” it wrote.

Cointelegraph has reached out to Silvergate for comment but did not receive a response at the time of publication.

Celsius creditors committee proposes suing Mashinsky, other Celsius execs

The proposed lawsuit names Alex Mashinsky and a number of former executives and co-founders for alleged “recklessness, gross mismanagement, and self-interested conduct.”

The official committee of Celsius creditors is proposing to sue Celsius co-founder Alex Mashinsky and other executives for “fraud, recklessness, gross mismanagement and self-interested conduct” that eventually led to the collapse of the crypto lender.

In a proposed complaint filed in a New York Bankruptcy Court on Feb. 14, attorneys representing the Official Committee of Unsecured Creditors said the move follows six months of investigations into Celsius’ current and former directors, officers and employees.

The committee is made up of seven Celsius account holders and was appointed by the U.S. Trustee in July. The committee represents the interest of Celsius account holders along with unsecured creditors.

“The Committee’s investigation has uncovered significant claims and causes of action based on fraud, recklessness, gross mismanagement, and self-interested conduct by the Debtors’ former directors and officers,” wrote lawyers from White & Case LLC.

The proposed lawsuit — which seeks damages in an amount to be proven at trial — aims to bring claims and causes of action against the following Celsius executives, persons and their associated entities:

  • Alex Mashinsky, co-founder, director and former CEO
  • Daniel Leon, co-founder, director and former CSO and chief operating officer
  • Hanoch “Nuke” Goldstein, co-founder and chief technology officer
  • Harumi Urata-Thompson, former chief financial officer and chief investment officer
  • Jeremie Beaudry, former general counsel and chief compliance office
  • Johannes Treutler, former head of Celsius’ trading desk and person in charge of purchasing CEL tokens on behalf of Celsius
  • Aliza Landes, the former vice president of Lending of Celsius and spouse of Daniel Leon
  • Kristine Mashinsky, the spouse of Alex Mashinsky

“Mr. Mashinsky, Mr. Leon, Mr. Goldstein, Mr. Beaudry, Ms. Urata-Thompson, and Mr. Treutler breached their fiduciary obligations to Celsius,” the lawyers wrote, adding:

“Those parties were aware Celsius was promising its customer’s interest payments that it could not afford and did nothing to fix the problem.”

The lawyers have also alleged the executives made “negligent, reckless (and sometimes self-interested) investments” causing Celsius to lose $1 billion in a single year, while mismanagement led to another quarter-of-a-billion dollar loss “because they could not adequately account for the company’s assets and liabilities.”

“After that loss, they did not invest in or develop the company’s systems to adequately fix the issue, resulting in further losses,” they alleged.

The motion also alleges the executives directed Celsius to spend “hundreds of millions of dollars” on public markets to inflate the price of CEL tokens, while they “secretly sold tens of millions of CEL tokens (or were aware of such sales)” for their own benefit.

Excerpt from the recent motion from Celsius’ official creditors committee. Source: Stretto

“They sat idly by as Mr. Mashinsky recklessly bet hundreds of millions of dollars on the movement of the cryptocurrency market. They covered up Mr. Mashinsky’s repeated lies about Celsius’ investments and financial condition.”

Related: Judge denies motions from Celsius users seeking to reclaim assets

“Finally, when it became apparent that Celsius would be required to file for bankruptcy, the Prospective Defendants withdrew assets from the sinking ship […] while actively encouraging customers to keep their assets on the Celsius platform,” the lawyers added.

The Celsius creditors committee said the proposed complaint was just the “first of many steps” in its investigation into potential former Celsius executive wrongdoings and the return of assets to victims.

A hearing on the proposed complaint will be held on March 8.

Cointelegraph contacted Celsius for comment but did not receive an immediate response.

Breaking: Paxos facing SEC lawsuit over Binance USD — Report

According to The Wall Street Journal, the notice relates to Binance USD, which the United States Securities and Exchange Commission is alleging is an unregistered security.

The United States Securities and Exchange Commission has reportedly told Paxos Trust Co. that it plans to sue the stablecoin issuer for violation of investor protection laws in relation to its Binance USD (BUSD) token.

According to a Feb. 12 report in The Wall Street Journal citing people familiar with the matter, the SEC has issued a Wells Notice to Paxos — a letter the regulator uses to tell companies of planned enforcement action.

The notice alleges that Binance USD is an unregistered security, according to the people.

According to Investopedia, after a Wells Notice is received, the accused is allowed 30 days to respond to it via a legal brief known as a Wells Submission, a chance to argue why the charges should not be brought against t prospective defendants.

An SEC spokesperson told Cointelegraph that it “does not comment on the existence or nonexistence of a possible investigation.”

A spokesperson for Binance said that BUSD is a “Paxos issued and owned product,“ with Binance licensing its brand to the firm for use with BUSD.

The spokesperson added that Paxos is regulated by the New York Department of Financial Services and that BUSD is a “1 to 1 backed stablecoin.”

“Stablecoins are a critical safety net for investors seeking refuge from volatile markets and limiting their access would directly harm millions of people across the globe,” the Binance representative said. “We will continue to monitor the situation. Our global users have a wide array of stablecoins available to them.”

Cointelegraph contacted Paxos for comment but did not receive an immediate response.

Paxos is the owner and issuer of BUSD,  a U.S. Dollar-collateralized stablecoin that has been around since the firm struck a partnership with Binance in September 2019. It is the third-largest stablecoin, with a market cap currently exceeding $16 billion.

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

FOX Business journalist Eleanor Terrett tweeted on Feb. 12 that the move was a “unilateral effort” from the SEC and other regulators to “blitz crypto.” She claimed that more Wells notices are expected to be sent over the coming weeks.

The reported action is the latest move by the SEC in its seeming crackdown on crypto-related firms.

Related: Coinbase will ‘happily defend’ staking in US courts, says CEO

On Feb. 9, the regulator announced a $30 million settlement with crypto exchange Kraken for its failure to register its crypto staking program which the SEC claimed was a security. Following the action SEC Chair Gary Gensler warned crypto firms to “come in and follow the law.”

The SEC faced criticism from its own people for its action against Kraken. On Feb. 10 SEC Commissioner Hester Peirce said the SEC’s conduct “is not an efficient or fair way of regulating,” slamming her own agency for shutting down a “program that has served people well.”

Reports also emerged last week that Paxos was being investigated by the NYDFS. However, the exact motive behind the probe is currently unclear.

This article was updated on Feb. 13 at 2:00am UTC to add a response from a Binance spokesperson and at 11:45 am UTC to add a response from a SEC spokesperson.