Buyer Beware Meets Caveat Vendor: 1,700 UK Investors Drag Binance to Court for £150M 🏛️

Nearly 1,700 UK investors have filed a lawsuit in the London High Court against Binance, founder Changpeng Zhao, Cayman-registered Binance Holdings, UAE-based Nest Exchange, and unnamed operators, seeking at least £150 million ($200 million) over crypto derivatives sold to retail customers without regulatory approval. The claimants allege that Binance offered leveraged trading products including leverage tokens, futures contracts and options from late 2019 onward, and that some users lost tens of thousands of pounds. Financial controller Tomas Sutas, for example, reportedly invested more than 100,000 British pounds ($132,400) into Binance's derivatives products before the value of his investments was wiped out, according to the Financial Times. The law firm representing the investors, KP Law, said the offerings breached the Financial Services and Markets Act 2000 and continued after the Financial Conduct Authority's ban on retail crypto derivatives took effect in January 2021. "There appeared to be no effective barrier preventing UK customers from accessing them," KP Law said. The FCA had announced the ban in October 2020, calling the more advanced trading products "ill-suited" to retail customers, and estimated the measure would save retail consumers around £53 million ($70 million).

A Binance spokesperson told Reuters the exchange would defend the claim through the appropriate legal process, stating: "Binance remains committed to its obligations to users and to operating in accordance with applicable law." A representative for the exchange did not immediately respond to Decrypt's request for comment. Under the Financial Services and Markets Act, deals arranged by an unauthorized firm can be ruled unenforceable, potentially allowing clients to reclaim money and losses. Binance's UK operations were heavily restricted in June 2021 when the FCA informed Binance Markets Limited that it could not operate in the region without written consent. Britain already forced Binance to restructure under UK financial promotion rules in 2023.

The lawsuit adds to a growing list of legal and regulatory challenges for the exchange. In 2023, the US Commodity Futures Trading Commission charged Binance and Zhao with running an illegal derivatives exchange, alleging the firm courted American users it had claimed to block; both later pleaded guilty in a $4.3 billion settlement, the largest the crypto sector had seen. Zhao was pardoned in the US last year. Binance has also faced allegations that it facilitated $850 million in transactions tied to a sanctioned Iranian financier that flowed to Iran's Islamic Revolutionary Guard Corps, which the exchange has strongly denied.

Separately, Binance formally withdrew its Markets in Crypto Assets (MiCA) application from Greece last week, a week after Reuters reported the application would be denied, leaving the exchange without the regulatory approval necessary to offer crypto services to users in EU nations beginning July 1. After withdrawing from Greece, Binance said it would apply via a different EU member nation, though it has not indicated which. In other regulatory developments, the FCA this week highlighted that it recently lifted its ban on retail access to select crypto exchange traded notes (ETNs), but is still reviewing its position on retail access to derivatives, writing: "Cryptoassets are high risk investments and will remain high risk under our regime."