Binance Faces $200 Million Lawsuit in U.K. Over Alleged Unregulated Products
Global cryptocurrency exchange Binance and its founder, Changpeng “CZ” Zhao, are facing a lawsuit in the United Kingdom seeking approximately $200 million (£150 million), according to a Reuters report.
The legal action alleges that Binance offered complex and high-risk financial instruments, such as leveraged trading products, without the necessary regulatory approval. The lawsuit reportedly involves close to 1,700 claimants, some of whom allegedly lost tens of thousands of dollars when these products were available in late 2019.
“Binance remains committed to its obligations to users and to operating in accordance with applicable law,” a spokesperson for the firm told Reuters, adding that the company intends to defend itself against the suit. A representative for the exchange did not immediately respond to a request for comment.
While claimants had access to these derivative products in late 2019, the U.K. Financial Conduct Authority (FCA) announced a ban on crypto derivatives for retail customers in October 2020, deeming such advanced trading products “ill-suited” for this demographic. This ban took effect in January 2021.
A recent overview of the regulator’s crypto policy, published on Tuesday, indicated that the FCA has lifted its ban on retail access to certain exchange-traded notes (ETNs) but is continuing to review its stance on retail access to derivatives. The regulator reiterated that “Cryptoassets are high risk investments and will remain high risk under our regime.”
Meanwhile, Binance, the world’s largest crypto exchange by trading volume, is also navigating regulatory challenges in Europe. Last week, the company formally withdrew its Markets in Crypto Assets (MiCA) application from Greece, a week after Reuters reported that the application was likely to be denied.
A MiCA license is crucial for firms seeking to offer crypto services across European Union member states starting July 1. Without such a license, Binance will be unable to operate its services in the region. Following its withdrawal from Greece, Binance stated its intention to apply for a license in another EU member nation, though it has not yet specified which country.
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