Paxos slapped with lawsuit over violating securities law

The United States Securities and Exchange Commission (SEC) has reportedly informed Paxos Trust Co. of intentions to sue the crypto platform. This comes just days after news broke that the New York Department of Finance was investigating the services of Paxos.

Reports note that the SEC will be issuing legal action against the crypto firm as a stablecoin issuer as a result of violation of investor protection laws by creating and issuing Binance USD ($BUSD), the stablecoin supported by Paxos. According to the Wall Street Journal, the SEC has issued a Wells Notice to Paxos – a letter the regulator sends to companies to inform them of planned enforcement action. The notice alleges that Paxos is supporting an unregistered security by offering the trade and sale of Binance USD.

According to a Binance representative, stablecoins are a form of investment away from the fiat and traditional currencies, rather than a security, noting:

“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. We will continue to monitor the situation. Our global users have a wide array of stablecoins available to them.”

The move by the SEC is part of a wider crackdown on crypto-related firms. More Wells notices are expected to be going out to crypto firms over securities violations, according to Fox business journalist Eleanor Terrett.

Earlier in the month, the SEC also announced a $30 million settlement with crypto exchange Kraken. The settlement came after Kraken had not registered its crypto staking program. According to the SEC, the staking program violated securities law. The action against Kraken sparked controversy from within the SEC, with Commissioner Hester Peirce saying the agency’s conduct was not efficient or fair.

The crypto industry continues to evolve, and regulators are trying to catch up with it. It remains to be seen how the SEC’s actions will play out, but it is clear that the agency is determined to ensure that crypto firms comply with investor protection laws. It is also important to note that stablecoins play a critical role as a safety net for investors in volatile markets, and limiting their access could harm millions of people worldwide.

Related Articles

Opera Mini’s Crypto Wallet MiniPay Expands to Include USDT and USDC

Opera Mini's MiniPay app, which was upgraded to a crypto wallet, has amassed three million users since its launch in September 2023.

Deutsche Telekom Joins Subsquid Decentralised Network

Deutsche Telekom’s collaboration with Subsquid follows its recent announcement to expand into BTC mining at the BTC Prague conference.

The Bahamas Pushes Banks to Adopt Sand Dollar CBDC

The Bahamas was one of the first countries in the world to launch a central bank digital currency — the “Sand Dollar” in 2020.

Crypto ATMs Near Record in Installations, Signalling Growing Adoption

The 2,564 cryptocurrency ATMs installed in 2024 are on track to surpass the 2,861 machines removed in 2023.

See All