Ontario Court Certifies Class Action Against Binance Over Alleged Illegal Crypto Sales
In a recent decision, the Ontario court certified a class action lawsuit against cryptocurrency exchange Binance over allegations of illegal sales of crypto contracts. The court noted that the plaintiffs claim the sales were illegal and void for failure of the defendants to register as required under securities law or to file a prospectus.
Regulators have found crypto contracts to be securities or derivatives, and the marketing of these contracts has been treated as a distribution under securities law. The court found that the plaintiffs have a potentially viable case, as they have met the evidentiary burden of establishing common issues across the class.
Binance, which promised to stop dealing with Canadian investors in mid-2021 amid scrutiny from the Ontario Securities Commission (OSC), settled with U.S. derivatives regulators, paying over US$2.7 billion in fines and disgorgement for violating U.S. law.
The court rejected Binance’s argument that investors traded with each other and that it was not a party to the transactions, stating that investors traded directly with Binance. This leaves open the possibility of rescission as a remedy for the class of investors.
Investors who purchased cryptocurrency derivative contracts from Binance beginning on Sept. 13, 2019 are considered members of the class. The court also concluded that damages, interest, and costs could be evaluated on a class-wide basis in this case.
The investigation by the OSC into possible regulatory breaches by Binance is ongoing, and the OSC has not brought any allegations against the firm at this time.
