£250m lawsuit against crypto firm Binance grows with 1000 new investors
A thousand new UK-based retail investors have been added to a group legal claim against crypto trading platform Binace and its founder, alleging they were sold high-risk, complex products that did not have regulatory authorisation from the financial watchdog.
There are now approximately 2,700 claimants in the case in England and Wales, with the total claim value estimated to be £250m, following it being originally filed in the High Court in June against the crypto platform and founder and former chief executive, Changpeng Zhao.
KP Law, the firm representing the claimants, said the eventual total claim is “expected to be significantly larger.”
The lawsuit centres on crypto wares known as derivative products, which are financial contracts between two parties used to trade on the performance of an underlying asset, commonly used by financial professionals to hedge against risk or in market speculation.
The products that are the subject of the group claim were not ordinary crypto investments based on a straightforward market price, but instead offered to consumers with far higher levels of risk or reward based on movements in the value of the underlying cryptocurrencies.
These products often involved the use of leverage – trading using borrowed money – to amplify any gains or losses, and contracts which allowed users to speculate on the future prices of various cryptocurrencies.
The Financial Conduct Authority (FCA) banned Binance‘s UK group company, Binance Markets Limited, from carrying out any regulated activities in the UK in June 2021 without prior written consent from the financial regulator.
The claimants argue that Binance – which has over 300 million global customers – knowingly made the products available to UK users of the platform from late 2019 to early 2020. They also allege that the crypto platform promoted these products for sale on their platform through campaigns, social media posts, email communications, and promotional campaigns.
The group allege that the derivative products, which are regulated under the Financial Services and Market Act 2000, were sold by Binance without the proper authorisation to do so.
Investors ‘suffered substantial losses’
KP Law said many of the investors, who are not professionals, “suffered substantial losses as a result of transactions placed with Binance, losing tens of thousands and in some cases millions of pounds. For many, the losses were life-changing, with an enormous impact on their day-to-day lives and causing significant mental strain.”
When approached for a comment, a Binance spokesperson said: “We do not comment on ongoing litigation. We will defend against these claims through the appropriate legal process in due course. Binance remains committed to its obligations to users and to operating in accordance with applicable law.”
The FCA is expected to open its authorisation gateway for the UK’s new crypto asset regime on September 30.
Changpeng Zhao was contacted for comment.