Nearly 1,700 UK investors have filed a £150 million lawsuit against Binance and its founder, Changpeng Zhao, in London's High Court, alleging the crypto exchange unlawfully sold complex crypto derivatives to retail customers without the authorization required under UK financial services law.
Reuters reported on June 30 that the claim relates to products marketed from late 2019 and seeks compensation for investors who allegedly suffered losses.
The case is one of the largest private legal actions brought against Binance in the UK and adds to the exchange's regulatory challenges in several jurisdictions.
Binance said it will defend the lawsuit and remains committed to complying with applicable laws. “Binance remains committed to its obligations to users and to operating in accordance with applicable law,” a spokesperson told Reuters.
Claimants Say Binance Marketed Crypto Derivatives Without Required UK Authorization
The investors say Binance entities sold and promoted derivative products to UK retail customers from late 2019, before the platform had the regulatory authorization they argue was required under UK law.
The claim alleges Binance knowingly offered investments such as leveraged products, which can increase both profits and losses, in breach of the Financial Services and Markets Act. The investors say the products were made available through the Binance trading platform and promoted to users in the UK.
The London High Court case names Cayman Islands-registered Binance Holdings, UAE-registered Nest Exchange, Changpeng Zhao and “persons unknown” who operate the Binance trading platform as defendants. The claimants are represented by London-based law firm Mishcon de Reya.
UK Crypto Derivatives Restrictions and Binance’s Regulatory History Provide Context for the Case
The UK’s Financial Conduct Authority (FCA) banned the sale, marketing and distribution of crypto derivatives and crypto exchange-traded notes to retail consumers from January 6, 2021. The regulator said retail investors could not reliably value those products because of price volatility, market abuse risks, cyber risks and limited understanding of cryptoassets.
Although the FCA's retail crypto derivatives ban came into force in January 2021, the claim alleges Binance required authorization under UK financial services law before offering the products to UK investors. Derivatives allow traders to gain exposure to crypto price movements without directly owning the underlying asset, but leverage can increase losses when markets move against a position.
Binance had already faced UK regulatory restrictions before the lawsuit. In June 2021, the FCA said Binance Markets Limited was not permitted to undertake regulated activity in the UK without prior written consent. Binance later published a notice saying Binance Markets Limited was not allowed to carry out regulated activities and that no other Binance.com entity held UK authorization, registration or a license for regulated activity in the country.
The exchange has also faced regulatory pressure outside the UK. Binance agreed to a $4.3 billion settlement with US authorities in 2023 over anti-money laundering and sanctions violations, while Changpeng Zhao stepped down as chief executive and later pleaded guilty to a US money-laundering charge.
Background on Binance and Changpeng Zhao
Binance was founded in 2017 by Changpeng Zhao, a crypto entrepreneur widely known as CZ. Within months of its launch, the exchange became one of the industry's largest trading platforms, benefiting from growing global demand for cryptocurrency trading during the 2017 bull market.
Today, Binance is the world's largest cryptocurrency exchange by trading volume, offering spot trading, derivatives, staking, custody and other digital asset services to users across multiple markets. The platform has expanded its product lineup beyond trading to include wallets, institutional services and blockchain infrastructure.
Zhao led Binance from its launch until stepping down as chief executive in 2023. Under his leadership, Binance became one of the most influential companies in the crypto industry and played a major role in shaping the global digital asset market.
