Ontario Court Certifies Class Action Against Binance for Alleged Securities Law Violations

A class action lawsuit has been certified against cryptocurrency exchange Binance, with plaintiffs claiming that the sales of crypto contracts were illegal and void due to the defendants’ failure to register as required under securities law or to file a prospectus. The court noted that regulators have classified crypto contracts as securities or derivatives, making the marketing of these contracts subject to securities law.

Despite Binance’s promise to stop dealing with Canadian investors in 2021 and its agreement with the Ontario Securities Commission (OSC) to wind down operations in the province, the OSC has launched an investigation into possible regulatory breaches by the company. Binance has already settled with U.S. derivatives regulators, paying over US$2.7 billion in fines and disgorgement for violating U.S. law.

In the proposed class action on behalf of Canadian investors, the court considered whether plaintiffs could seek rescission of their crypto trades on the Binance platform as a remedy. Binance argued that investors traded with each other and not with the platform, but the court rejected this argument, stating that investors traded directly with Binance.

Investors who purchased cryptocurrency derivative contracts from Binance starting on Sept. 13, 2019 are considered members of the class. The court has allowed for damages, interest, and costs to be evaluated on a class-wide basis in this case, leaving open the possibility of rescission as a remedy for the investors. The investigation by the OSC is ongoing, and no allegations have been brought against Binance in this matter.