Crypto exchange Binance and its founder Changpeng ‘CZ’ Zhao have been named in a newly filed United Kingdom lawsuit seeking nearly $200 million (approximately 150 million British pounds), according to a report from Reuters published Monday. The claim is being brought on behalf of nearly 1,700 British investors.
What the Lawsuit Alleges
The suit claims that Binance offered complex and risky financial instruments, including leveraged trading products, to retail customers without the required regulatory approval. Nearly 1,700 British investors are listed as claimants, some of whom reportedly lost tens of thousands of dollars when those products were accessible in late 2019.
Binance Pushes Back
‘Binance remains committed to its obligations to users and to operating in accordance with applicable law,’ a spokesperson for the exchange told Reuters, adding that the firm intends to defend itself. A Binance representative did not immediately respond to a separate request for comment from Decrypt.
FCA Backdrop
Although claimants had access to the derivative products in late 2019, the UK Financial Conduct Authority (FCA) moved to ban crypto derivatives for retail investors in October 2020, describing the more advanced products as ‘ill-suited’ to retail customers. That ban formally took effect in January 2021.
A regulatory overview published by the FCA on Tuesday noted that it recently lifted its ban on retail access to select exchange traded notes (ETNs), but confirmed it is still reviewing whether to restore retail access to crypto derivatives more broadly. ‘Cryptoassets are high risk investments and will remain high risk under our regime,’ the regulator wrote.
Wider European Troubles for Binance
The UK lawsuit adds to a difficult regulatory stretch for Binance in Europe. Last week, the exchange formally withdrew its Markets in Crypto-Assets (MiCA) licence application from Greece, roughly a week after Reuters reported the application was on course to be denied. Binance has said it plans to re-apply through a different EU member state, though it has not named which, leaving its access to EU users uncertain past the July 1 deadline.
