UK Investors Sue Binance, Former CEO Zhao for $200M

UK Investors Launch $200 Million Lawsuit Against Binance and Founder

Approximately 1,700 United Kingdom investors have initiated a group lawsuit in London’s High Court, targeting cryptocurrency exchange Binance and its founder, Changpeng Zhao, also known as CZ. The claimants allege that the defendants unlawfully sold high-risk crypto derivatives products to retail investors without the necessary authorization.

Allegations of Unauthorized Sales

The plaintiffs contend that between late 2019 and 2020, Binance offered products such as leveraged tokens, options, contracts, and futures without approval from the UK’s Financial Conduct Authority (FCA). The lawsuit, filed under the Financial Services and Markets Act, categorizes these derivatives as “specialized investments” under relevant regulations. Despite the UK regulator banning Binance from selling these complex products in 2021, the exchange allegedly continued to offer them to its users.

Accusations of Aggressive Promotion

The crypto traders also accuse Binance of actively promoting these products through various channels, including advertising campaigns, online materials, social media posts, and email communications.

Hannah Sharp, a partner at the law firm representing the investors, stated that her clients have incurred significant financial losses and expressed determination to hold CZ and the exchange accountable. The Financial Times reported that individual traders lost sums ranging from tens of thousands to millions of dollars. The claimants are now seeking approximately $200 million in compensation.

Binance’s Response

Binance has not yet formally responded to the specific accusations within the lawsuit but has confirmed its awareness of the proceedings. A company statement read, “We do not comment on ongoing litigation. We will defend against these claims through the appropriate legal process in due course.”

Broader Regulatory Challenges

This legal action adds to a growing list of regulatory and legal hurdles Binance has faced in recent years. Notably, the exchange recently failed to secure an EU crypto license. Following this setback, Binance initially indicated it would cease services in the region. However, CZ later reaffirmed the company’s commitment to Europe, stating plans to seek a permit through an alternative jurisdiction.

This development comes after the European Securities and Markets Authority (ESMA) mandated that all unauthorized digital asset firms cease operations by July 1 if they had not obtained a MiCA license by the deadline. Industry executives anticipate that this directive could impact over 80% of crypto platforms operating in the region.

UK regulators have consistently adopted a cautious stance on cryptocurrencies, frequently warning the public about their high-risk nature. The FCA recently introduced its long-awaited rules for the sector, which will require firms to adhere to financial safety standards, comply with anti-money laundering and market abuse laws, and meet consumer protection requirements.