Key Takeaways:
Nearly 1,700 British investors sued Binance and founder Changpeng Zhao for at least £150 million ($200 million) in London's High Court, alleging the exchange sold risky crypto derivatives without regulatory authorization.
Binance said it would defend against the claims through the appropriate legal process and remains committed to operating in accordance with applicable law, a spokesperson told Reuters.
The claimants, represented by law firm KP Law, allege Binance's leverage tokens, futures contracts and options offerings breached the Financial Services and Markets Act 2000. The products remained accessible to UK customers even after the Financial Conduct Authority banned retail crypto derivatives in January 2021, the law firm said. One affected customer, financial controller Tomas Sutas, lost more than £100,000 ($132,400) after his investment was wiped out, the Financial Times reported.
The lawsuit adds to mounting legal pressure on Binance, which recently failed to secure a Markets in Crypto-Assets-compliant license from an EU member state before the July 1 deadline. The exchange also faces allegations it facilitated $850 million in transactions tied to a sanctioned Iranian financier, which Binance has denied. A ruling against Binance could set a precedent for whether unauthorized platforms bear liability for losses on products they sold without regulatory approval.
The case names Cayman Islands-registered Binance Holdings, UAE-registered Nest Exchange, Zhao and "persons unknown" who operate the Binance trading platform as defendants. Binance's UK operations became heavily restricted in June 2021 when the FCA informed Binance Markets Limited it could not operate in the region without written consent.
KP Law said it is still identifying the full scope of affected customers. "While the precise number of UK customers affected is not publicly known, Binance is one of the world's largest cryptocurrency exchanges, meaning that a substantial number of users could potentially have been exposed to these issues," the firm said.
The lawsuit revives a question the crypto industry has long avoided: when an unlicensed platform sells high-risk products, who absorbs the losses — the platform or the trader? Under the Financial Services and Markets Act, deals arranged by an unauthorized firm can be ruled unenforceable, allowing clients to reclaim their money and losses. The claim lands as Binance exits parts of Europe after its MiCA license bid failed, leaving its main authorization in the UAE.
This article is for informational purposes only and does not constitute investment advice.
