On June 30, nearly 1,700 British investors filed a class action lawsuit against the world's largest cryptocurrency trading platform Binance and its founder Changpeng Zhao in the High Court in London, accusing it of selling high-risk, complex cryptocurrency derivatives to domestic retail investors without authorization from the British financial regulator, demanding compensation of at least 150 million pounds (approximately US$200 million) in losses.
The plaintiff claimed that since the end of 2019, Binance-related entities have continued to provide a variety of derivative products, including highly leveraged contracts, in the British market, and promoted these products to retail investors through online promotions, marketing activities, etc., but failed to fulfill corresponding compliance obligations and fully disclose risks, violating the relevant provisions of the British Financial Services and Markets Act.
According to materials submitted to the High Court in London, the targets of this lawsuit include Binance Holdings registered in the Cayman Islands, Nest Exchange in the United Arab Emirates, Binance founder Changpeng Zhao, and a number of “unknown persons” whose identities have not yet been identified. They are accused of jointly participating in promoting unauthorized crypto derivatives to British investors. Some claimants stated that they lost tens of thousands of pounds in related products. The lawsuit stated that the defendants "knew or should have known" that these highly leveraged products might cause huge losses in a short period of time, but continued to sell and promote them, constituting serious damage to the interests of retail investors.
The plaintiff’s legal team pointed out in a statement that the core of the case lies in whether Binance provided financial products within the scope of regulation to local investors without obtaining UK regulatory approval, and amplified the risk of losses with the help of complex designs and high leverage effects. They emphasized that the crypto derivatives involved in the case are similar to complex leveraged instruments in traditional financial markets and require stricter supervision and transparency. However, during the promotion process, the related products were packaged as easy-to-obtain investment opportunities with huge potential returns, without fully reminding consumers of the violent price fluctuations and liquidation risks they may face.
Binance has publicly stated many times earlier that the company is committed to complying with local regulations in various jurisdictions and constantly adjusting its product lines to comply with regulatory requirements. However, for the latest class action lawsuit filed in London, it has not yet responded in detail to the specific accusations cited by the plaintiff through public channels. As regulatory agencies around the world have intensified their scrutiny of crypto assets and related derivative transactions in recent years, industry insiders believe that this lawsuit will become an important legal test for British retail investors to hold large crypto platforms accountable. The results may affect the future business layout and compliance strategies of crypto exchanges in the UK and other major markets.
