Summary
- Changpeng "CZ" Zhao and Binance are facing a lawsuit in the U.K. seeking close to $200 million.
- The lawsuit claims that the exchange provided high-risk financial products without the necessary regulatory approvals.
- Approximately 1,700 British investors are involved as claimants.
Binance, a prominent global cryptocurrency exchange, along with its CEO Changpeng "CZ" Zhao, has been named in a lawsuit in the United Kingdom that seeks nearly $200 million (£150 million), as reported by Reuters.
The legal action alleges that Binance offered complex and risky financial products, including leveraged trading options, without securing appropriate regulatory approval. The lawsuit lists around 1,700 claimants, some of whom reportedly incurred losses amounting to tens of thousands of dollars when these products were available in late 2019.
A spokesperson for Binance stated to Reuters, "Binance remains committed to its obligations to users and to operating in accordance with applicable law," emphasizing that the company intends to defend itself against the allegations. A representative from Binance did not respond immediately to a request for comment from Decrypt.
Although the claimants accessed these derivative products in late 2019, the U.K. Financial Conduct Authority (FCA) imposed a ban on crypto derivatives for retail investors in October 2020, determining that such advanced trading products were unsuitable for retail customers.
This ban took effect in January 2021. A recent overview of the FCA's crypto policy noted that while the regulator has lifted the ban on retail access to certain exchange-traded notes (ETNs), it is still assessing its stance on retail access to derivatives.
The regulator cautioned, "Cryptoassets are high-risk investments and will remain high risk under our regime."
In addition to this lawsuit, Binance is facing other challenges in Europe. Recently, the exchange withdrew its application for a Markets in Crypto Assets (MiCA) license in Greece, following reports that the application was likely to be rejected.
Acquiring a MiCA license is crucial for Binance to gain the regulatory approval needed to provide crypto services to customers in EU countries starting July 1. Without this license, Binance will be unable to operate in that capacity. After pulling out from Greece, Binance indicated it plans to apply for a MiCA license through another EU member state, although it has not specified which one.