(Kitco News) – Investors in Canada have become the latest to target Binance, the world’s largest cryptocurrency exchange, with a class-action lawsuit, alleging the platform violated local securities laws.
According to a certification motion published by Ontario’s Superior Court (OSC) of Justice on April 19, plaintiffs Christopher Lochan and Jeremy Leeder filed a class-action lawsuit against Binance alleging that it sold crypto derivative products to retail investors without registration.
“In this proposed class action, the Plaintiffs, on behalf of retail purchasers of cryptocurrency derivative products from the Defendants, sue for damages and rescission of their contracts under section 133 of the Ontario Securities Act, RSO 1990, c. S.5 (“OSA”) and at common law,” the filing said. “They claim that those sales were illegal and void for failure of the Defendants to register as required under the OSA or to file a prospectus.”
The plaintiffs argued that “cryptocurrency derivatives contracts have previously been held to be a ‘security’ and ‘investment contracts’ under the OSA,” and reiterated in their Amended Statement of Claim that “purchase and sale of the Defendants’ products contain all of the elements of an ‘investment contract.’”
The plaintiffs are seeking damages and rescission of unlawful derivatives trades, arguing that they are but 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.”
“It is noteworthy here that cryptocurrency derivatives traders include a great many retail investors,” the certification motion reads. “The OSC has reported that more than half of Canadian crypto asset owners have less than $5,000 in the market.”
Traders who believe they qualify to be included in the lawsuit can reach out to the legal team for more information. The class definition proposed by the plaintiffs states: “All persons or entities in Canada who, from September 13, 2019 to the date of certification of this action as a class proceeding (the “Class Period”), purchased cryptocurrency derivative contracts from Binance. Excluded from the class are the Defendants and their parent companies, subsidiaries, and affiliates.”
“Both representative Plaintiffs can be expected to fairly and adequately represent the interests of the class,” the lawsuit reads. “They have produced a litigation plan that sets out a workable method of advancing the proceeding and of notifying the class members when necessary to do so. While the plan may need to be amended at some point down the road, it is well established that litigation must be taken not as a fixed and final product but as a work in progress.”
This is not Binance’s first time dealing with the legal system in Canada.
In June 2021, Binance announced that it planned to cease operations in Ontario after the OSC approached the exchange with a warning.
“As part of our continuing compliance efforts, Binance has updated its Terms of Use to provide that Ontario (Canada) has become a restricted jurisdiction, effective 2021-06-26 at 3:59:59 AM (UTC),” a statement on their website said. “Regrettably, Binance can no longer continue to service Ontario-based users. Ontario-based users are advised to take immediate measures to close out all active positions by December 31, 2021.”
Despite this statement, many Ontario residents continued to access the platform, leading to further action by the OSC.
“As a result of its failure to adhere to this announced cessation of sales, in early 2022, the OSC notified the defendants of its intention to seek a cease trade order,” the certification document said. Following an investigation by the OSC, the court served a summons to Binance on May 11, 2023, “seeking communications in its possession or control regarding Ontario, or Canada generally, among its directors, officers, employees, agents, consultants and contractors and related entities, including its Canadian affiliate.”
“On May 12, 2023, Binance publicly announced that it would withdraw from operating in Canada and asked users to close any open positions by September 30, 2023, as all Canadian users would be placed into liquidation-only mode from October 1, 2023,” the filing said.
Despite this declaration, local authorities have continued to pursue legal action against the exchange. “The OSC’s investigation into the defendants is ongoing,” the court motion read.
