- U.S. judge denies Binance bid to compel arbitration.
- Investors may pursue class action over token sales.
- Court says arbitration clause not adequately disclosed.
- Case revived after appeals court overturned 2022 dismissal.
On Thursday, a federal judge denied Binance the request to compel customers to give in to arbitration and stated that investors who alleged that the largest cryptocurrency exchange in the world was unlawfully selling unregistered tokens could bring their claims before a US court. According to U.S.
District Judge Andrew Carter of Manhattan, the customers could file claims that arose by February 20, 2019 in court since Binance had not adequately informed them that it had amended its terms of use to permit arbitration, and had waived its right to file a lawsuit in a lawsuit. The decision is a major procedural loss to the exchange.
Arbitration Clause Rule not announced and Class-Action Waiver not upheld
Carter stated that Binance did not provide any indications that it declared an arbitration provision or advised that its terms of use were where customers could find an arbitration provision. He also decided that the so-called class-action waiver contained in Binance terms of use in 2019 was unintelligible and non-enforceable.
In November 2019, customers had independently agreed to cut claims accruing after February 20, 2019, reducing the resolution of the case. One of the defendants is Binance founder and former chief executive Changpeng Zhao.
Both lawyers did not comment on requests. A spokesperson of Binance added that the company would vehemently fight the few claims that still remain in this baseless lawsuit.
Case Revived by Appeals Court Following 2022 Dismissal; Seven Tokens at Issue
The plaintiffs lost seven tokens, ELF, EOS, FUN, ICX, OMG, QSP and TRX, and alleged the Binance never warned them that token purchases come with substantial risks, which is mandated by the federal and state securities laws. They wanted to reclaim all the sum they paid.
Also Read: PBOC Cuts 20% Forex Risk Reserve to Cool Yuan Rally on $1.2T Trade Surplus
It has a long history which: The case was dismissed by Carter in 2022, but two years later brought back by a federal appeals court. The decision of Thursday deals with the issue of arbitration only and not with the merits of the securities claims on which it is based.
Parallel Canada Class Action Case Moves Forward
It is a strategic decision that has an outward case. The good thing is that defendants often choose arbitration as the proceedings are kept in secret, plaintiffs find it more difficult to collect evidence, and it is rather less expensive. By comparison, in a class action, there is a pooling of assets among a large number of claimants and the financial and reputational implications to a defendant are provided a significant boost.
The ruling by Judge Carter to clear the path to allow an open court proceeding opens the possibility of a public proceeding that would likely force Binance to provide internal documents and communications under the discovery rules.
In another case concerning a similar case in Ontario, Canada, a court has independently authorized a class-action suit against Binance on ground of supplying crypto derivatives to retail investors inadequately registered.
SEC Suit: Zhao Cleared, Senate Oversight Grows
The decision of Thursday comes as Binance faces increasing regulatory pressure in the United States. In January 2025 the Securities and Exchange Commission dismissed a civil action against the exchange, and President Donald Trump subsequently gave Zhao a presidential pardon, soon after assuming office, so that the former executive could re-enter the United States after being convicted of money laundering conspiracy.
But the current chief executive of Binance is the subject of a letter written to him recently by Senator Richard Blumenthal who questions him about the allegations that the exchange was in collaboration with sanctioned Iranian and Russian organizations and indicates internal investigations that Binance associates had been involved in laundering money and upon illegal transactions. Blumenthal claimed that the corporation tried to avoid responsibility instead of stopping the green-belting behavior.
