Binance and Coinbase vs. the SEC - Litigation Finance Journal

[Gunnar Larson]

Check out my new article:
https://litigationfinancejournal.com/binance-and-coinbase-vs-the-sec/

On June 5, 2023, the United States Securities and Exchange Commission (SEC)
sued the world’s largest cryptocurrency exchange, Binance, for allegedly
misleading investors and regulators while operating an unregistered
exchange. One day later, the SEC sued the largest cryptocurrency exchange
in the United States, Coinbase, for similar allegations. Now, litigation
financiers around the globe look on as top law firms organize to defend
Binance and Coinbase against the SEC.

Bloomberg Law reports that Binance and Coinbase have tapped some of the
United States’ top law firms to defend their future to exchange nearly
$120B in cryptocurrency token assets. The SEC claims that most of these
tokens sum up to unregistered securities. Binance and Coinbase deny any
wrongdoing.

Agencies such as Lipton, Rosen & Katz, Milbank, Latham & Watkins, Wilmer
Hale and Sullivan & Cromwell are among those said to bank upwards of $50M –
$100M in legal fees for Binance’s and Coinbase’s defense against the SEC’s
recent actions. Sullivan & Cromwell is reported to have billed over $80M in
fees associated with the FTX Chapter 11 bankruptcy litigation, according to
court documents.

The SEC says that unregistered securities in the form of cryptocurrency
violate US investor protection laws. Yet, former SEC leaders have joined
Binance’s defense team. Richard Grime (of Gibson Dunn & Crutcher) has been
hired by Binance. Mr. Grime formerly served as assistant director of the
SEC’s enforcement division. William McLucas (of Wilmer Culter Pickering
Hale and Dorr) formerly served as the SEC’s enforcement director. Mr.
McLucus has been hired by BAM Trading Services, the operator of Binance.US.

What does all of this mean for the litigation finance industry?

Experts suggest that private actions could be explored by litigation
investors and their clients in the wake of the SEC’s approach to
cryptocurrency tokens being exchanged as unregistered securities. However,
collectability remains a pertinent issue for litigation investors, as they
consider whether to pursue crypto litigation funding.
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