Recent troubles are not the first for Binance in Canada, which has faced uphill battles with its provincial regulators throughout the last few years.
The lawsuit seeks both damages and rescission of these trades. It also claims that Binance’s operations failed to comply with necessary registrations and prospectus filings as stipulated by securities regulations. “The plaintiffs claim that those sales were illegal and void for lack of the required registration,” the court noted in its ruling.
While certifying the class action, the court recognized that crypto contracts are considered securities or derivatives under current regulations, and that the marketing of these contracts qualifies as distribution. “The plaintiffs have met the evidentiary burden…establishing some basis in fact that the issues raised in the four liability questions are common across the class,” the decision stated.
Previously, Binance was found by Ontario courts to have operated its platform and made it accessible to Canadian users. Amid regulatory scrutiny by the Ontario Securities Commission (OSC), Binance committed in mid-2021 to cease its dealings with Canadian investors and started winding down its operations in Ontario by early 2022. In the weeks leading up to Binance’s departure, the exchange rescinded that commitment, claiming that its authorization as a money services business allows it to continue operating in the province.
The industry’s giant seemingly opted to pull out of Ontario, rather than comply with securities law or face regulatory scrutiny. An ongoing investigation by the OSC into potential regulatory breaches by Binance has not yet resulted in formal allegations.
The Ontario court also addressed Binance’s argument that it merely facilitated trades between investors, not acting as a direct party. The court rejected this, stating, “The only contracts found in the record are 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 decision paves the way for the assessment of damages, interest, and costs on a class-wide basis, with all investors who purchased cryptocurrency derivative contracts from Binance since September 13, 2019, eligible to join the class action.
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