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 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.

The Binance UK Lawsuit Tests Who Pays

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.

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.

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.

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.

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.

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

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.

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

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.

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

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

Source: BeInCrypto