Ontario Court of Justice in Canada sues Binance for securities violations

Source: Finance Feeds; Compiled by: Baishui, Golden Finance

The recent troubles are not the first for Binance in Canada, which has faced an uphill battle with provincial regulators over the past few years.

The lawsuit seeks damages and the revocation of these transactions. It also claims that Binance's operations failed to comply with the necessary registration and prospectus filing required by securities regulations. The court stated in its ruling: "The plaintiffs allege that these sales are illegal and invalid due to the lack of the required registration."

In certifying the class action, the court acknowledged that cryptocurrency contracts are considered securities or derivatives under current regulations and that the marketing of these contracts qualifies for distribution. The ruling stated: "The plaintiff has borne the burden of proof...establishing some factual basis that the issues raised in the four liability issues are common."

Previously, the Ontario court found that Binance operated its platform and was open to Canadian users. Amid regulatory scrutiny by the Ontario Securities Commission (OSC), Binance pledged in mid-2021 to cease dealing with Canadian investors and begin winding down its operations in Ontario in early 2022. Weeks before Binance left, the exchange rescinded its pledge, claiming that its authorization as a money services business enabled it to continue operating in the province.

The industry giant appears to have chosen to exit Ontario rather than comply with securities laws or face regulatory scrutiny. The OSC is conducting an ongoing investigation into Binance for potential regulatory violations, but no formal charges have yet resulted.

The Ontario court also responded to Binance’s argument that it merely facilitated trades between investors, rather than acting as a direct party. The court rejected that argument, saying that “the only contract found in the record is that between class members and Binance itself,” likening the relationship to that between a customer and a store, rather than between independent parties.

The court’s ruling paves the way for the assessment of full class damages, interest, and costs, with all investors who purchased cryptocurrency derivatives contracts from Binance since September 13, 2019 eligible to participate in the class action lawsuit.