Binance, one of the largest cryptocurrency exchanges in the world, was sued in Canada last week, over alleged violations of Ontario’s securities laws. The class action lawsuit was filed by two representative plaintiffs demanding damages and rescission of sale contracts entered into between retail customers and Binance. The plaintiffs claimed that the cryptocurrency sales were "Illegal and void for failure of the Defendants to register as required under the [Ontario Securities Act] or to file a prospectus."
The certification motion dated 19 April accepted the relevant class in the lawsuit as all persons (excepting Binance or its subsidiaries) from September 13, 2019 to the date of the certification of the proceedings who purchased cryptocurrency derivative contracts from Binance.
The plaintiffs additionally highlighted the importance of the class action, submitting that the lead plaintiffs were only ‘two of the tens of thousands of Canadian users of the Binance website who invested in cryptocurrency products and who claim that those products were sold by the Defendants illegally.’
The certification states that Binance were previously notified by the Ontario Securities Commission (OSC) that it was contemplating enforcement proceedings:
On April 20, 2021, the Ontario Securities Commission (“OSC”) notified Binance that it was contemplating enforcement proceedings in respect of the Defendants “trading in and distributing securities without registering with the OSC and without filing a prospectus or obtaining an exemption, and that Binance was carrying on business as a marketplace without authorization
The class action follows the company’s withdrawal of services from the Canadian Market in May 2023, which placed all Canadian users into ‘liquidation-only mode’ from 1 October 2023 and indicative of the continued scrutiny Canadian authorities have maintained over the exchange following the departure of services from their lands.
The steps taken by the OSC against Binance can be seen as another example of the increasing pressure major exchanges face by global regulators despite the comparatively slow development of clear regulation for exchanges worldwide.
By Kelly Kim and Tim Masters