The prominent global cryptocurrency exchange, Binance, has found itself facing a class action lawsuit in Canada. The lawsuit alleges that the company violated securities laws in lenient jurisdictions by selling crypto derivatives without obtaining prior approval. On April 19th, the Ontario Superior Court of Justice accepted the certification motion, marking the first step in this legal battle against the exchange.
As a result, the defendants (represented by Christopher Lochan and Jeremy Leeder) have filed a lawsuit against Binance, accusing the company of violating the Ontario Securities Act (OSA) and federal regulations. The outcome of this lawsuit could have significant implications for Binance in the Canadian market and directly impact its users.
The focus of the Binance case centers around retail investors. The claim document asserts that “Binance circumvented the entire registration process by offering exchange-traded crypto derivatives to Canadians without their knowledge of the country’s digital asset guidelines.” The applicants also argue that the exchange platform violated the rule against practices that could harm investors within the country’s regulations. The legal action seeks monetary compensation and the invalidation of all trades that allegedly violated Canadian law.
According to reports, tens of thousands of Canadians have invested in and allocated their funds to these derivatives on the Binance platform. This fact highlights that the majority of traders are engaging in derivative trading rather than purchasing digital coins. It is estimated that over 50% of Canadians own at least $5,000 worth of digital assets.
The Ontario Securities Commission (OSC) has intensified its scrutiny of Binance’s operations. Binance is a significant player in the crypto trading market and dominates the centralized derivatives market globally, along with its competitors OKX and Bybit. In the early stages of this month, trading volumes on the Binance platform accounted for 58% of the total spot market trade volume.
Following in the footsteps of Quebec, Ontario could become the second Canadian province to ban crypto trading for its residents. This would further complicate matters for Binance, as it already implemented a ban in mid-June 2021. The OSC’s decision to wait five months before taking action against the exchange was motivated by a formal warning issued to Binance. However, this warning did not deter Binance from continuing its operations, prompting the regulator to issue a subsequent notice to the exchange in early 2022.
It is worth noting that Binance has faced legal issues even after announcing its departure from the Canadian market on May 17th, 2023. This case brought by the OSC against Binance underscores the need for regulatory integrity within the cryptocurrency industry. In the aftermath of such incidents, industry participants are likely to face increased regulatory oversight as regulators seek to protect investors from the risks associated with cryptocurrency volatility.
