Ontario Superior Court certifies class action against crypto asset trading platform Binance

In a recent ruling, the Ontario Superior Court of Justice has certified a class action lawsuit against crypto asset trading platform Binance Holdings Limited.

The plaintiffs, representing Canadian retail purchasers of cryptocurrency derivative products, have sued for damages and rescission of contracts, alleging illegal sales by Binance due to its failure to register under the Ontario Securities Act (OSA) or to file a prospectus.

Binance, a Cayman Islands company, and its Canadian subsidiaries are accused of marketing and selling cryptocurrency derivatives to Canadian investors from 2019 to 2023 without the necessary registrations. This certification is part of a broader scrutiny under which Binance has come under various regulatory radars, including prior actions by the Ontario Securities Commission (OSC) due to non-compliance with securities laws.

During the period in question, Binance enabled customers to trade in three types of cryptocurrency derivatives—futures, options, and leveraged tokens—via its online platform. These products, recognized as securities under the OSA, were available to Canadian users through a streamlined online setup process described as a “click contract.”

In detailing its operations, Binance promoted a unified ecosystem approach, presenting all associated entities as part of a single operational network. This effectively blurred the lines of individual responsibility within the corporate structure. However, at no point did Binance or its subsidiaries obtain the necessary regulatory approvals to operate as a securities dealer or distributor in Canada, thus contravening the OSA.

The certification motion focused on whether the class action could adequately address the issues at stake without descending into individual claim assessments. The Superior Court found a commonality in the allegations, particularly the failure to comply with regulatory requirements, which could be collectively addressed. Furthermore, the court dismissed Binance's arguments against rescission, a remedy seeking to return parties to their pre-contractual state, citing a lack of evidence that such a measure would be unfeasible or inappropriate on a class-wide basis.

As a result of the court’s decision, the class action will proceed, encompassing all Canadian purchasers of Binance's cryptocurrency derivatives within the specified period. The plaintiffs aim to establish that Binance’s lack of compliance with securities laws resulted in the illegal sale of financial products, warranting damages and rescission for affected investors. Legal proceedings against Binance continue to develop, with the company also settling regulatory disputes in the United States.