by Coinstrooper Crypto Articles
Quick Take
  • The claimants argue the exchange marketed risky leveraged products to retail traders from late 2019 without proper authorization.
  • Some say they lost tens of thousands of pounds when those bets turned against them.
  • When an unlicensed platform sells high-risk products, who absorbs the losses, the platform or the trader?
  • Britain’s Financial Conduct Authority (FCA) banned retail crypto derivatives in January 2021.

What Happened

Nearly 1,700 UK investors have sued Binance and founder Changpeng Zhao (CZ) in London’s High Court, seeking at least £150 million ($200 million) over crypto derivatives they say were sold unlawfully.

The post UK Investors Sue Binance for $200 Million in Losses They Chased With Leverage appeared first on BeInCrypto.

Market Context

The claimants argue the exchange marketed risky leveraged products to retail traders from late 2019 without proper authorization. Some say they lost tens of thousands of pounds when those bets turned against them.

Britain’s Financial Conduct Authority (FCA) banned retail crypto derivatives in January 2021. It cited extreme volatility and a high risk of sudden losses. The regulator estimated the ban would save retail consumers around £53 million ($70 million).

The claimants say Binance pushed such products around that ban, breaching the Financial Services and Markets Act.

Defenders of open trading say adults chose leverage with full warnings. Critics counter that an unauthorized seller cannot hide behind the risks its customers accepted.

The allegations echo earlier ones. In 2023, the US Commodity Futures Trading Commission charged Binance and CZ with running an illegal derivatives exchange.

Why It Matters

The case reaches beyond one exchange. It revives a question crypto has long avoided. When an unlicensed platform sells high-risk products, who absorbs the losses, the platform or the trader? It is a gap UK crypto oversight has not closed.

That statute may matter more than any risk warning. Under it, deals arranged by an unauthorized firm can be ruled unenforceable, letting clients reclaim their money and losses.

CZ, pardoned in the US last year, is named personally. Even so, that structure could make any UK judgment hard to enforce.

Should the court void these deals, buyer beware may no longer protect exchanges that sold unauthorized products. The precedent would reach past Britain.

Details

The Binance UK Lawsuit Tests Who Pays

The real question is whether buyer beware can survive when the seller broke the rules. Britain already forced Binance to restructure under UK financial promotion rules in 2023.

Binance Digs In for a Long Fight

Binance has vowed to defend the claim. A spokesperson told Reuters the exchange honors its legal duties.

“Binance remains committed to its obligations to users and to operating in accordance with applicable law.”

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Regulators said it courted American users it had claimed to block. Months later, both pleaded guilty in a $4.3 billion settlement, the largest the crypto sector had seen.

The London claim names Cayman-registered Binance Holdings, UAE-based Nest Exchange, and unnamed operators.

The timing is awkward. The claim lands just as Binance exits Europe after its EU license bid failed, leaving its main authorization in the UAE.

For an industry built on caveat emptor, that is the real verdict, even if compensation takes years.