Binance, one of the world's largest cryptocurrency exchanges, has been hit with a class-action lawsuit in Canada. The lawsuit, filed in the Ontario Superior Court of Justice, alleges that Binance violated local securities laws by selling crypto derivative products to retail investors without proper registration.

The Allegations: According to the certification motion published on April 19, the plaintiffs, represented by Christopher Lochan and Jeremy Leeder, claim that Binance sold crypto derivatives products in violation of the Ontario Securities Act (OSA) and federal law. The lawsuit seeks damages and rescission (cancellation) of unlawful derivatives trades.

The plaintiffs argue that tens of thousands of Canadian users of the Binance website invested in the exchange's cryptocurrency derivatives products. The motion highlights that cryptocurrency derivatives traders include a significant number of retail investors, with more than 50% of Canadian crypto owners having at least $5,000 invested in the market, according to the Ontario Securities Commission (OSC).

Binance's Dominance in the Derivatives Market

Binance is a global cryptocurrency exchange powerhouse, accounting for 58% of the total spot trading volumes among centralized exchanges as of March 2024. Beyond its leading position in the spot crypto trading market, Binance also operates the largest derivatives market among other major exchanges like Bybit and OKX.

Data from Bybit, a prominent cryptocurrency derivatives exchange, reveals that the derivatives market for centralized exchanges (CEXs) is "almost entirely dominated" by Binance, OKX, and Bybit. This underscores Binance's significant presence and influence in the crypto derivatives space.

Regulatory Scrutiny and Ongoing Investigation

The latest class-action lawsuit against Binance comes after the exchange announced plans to cease operations in Ontario in June 2021, following a warning from the OSC. However, the certification motion states that even after Binance announced its departure from Canada in May 2023, local authorities have continued to investigate the exchange.

"As a result of its failure to adhere to this announced cessation of sales, in early 2022, the OSC notified the defendants of its intention to seek a cease trade order," the court document reads. Additionally, it mentions that "the OSC's investigation into the defendants is ongoing."

The plaintiffs in the class-action lawsuit allege that Binance's actions violate securities laws and aim to hold the exchange accountable. By seeking damages and the rescission of unlawful derivatives trades, the lawsuit aims to protect the interests of Canadian investors and ensure compliance with local regulatory frameworks.

As the legal proceedings unfold, the cryptocurrency community and regulators will closely monitor the case's developments. The outcome could have significant implications for Binance's operations in Canada and potentially set precedents for regulatory compliance in the crypto derivatives market.