1,700 UK investors sue Binance and Changpeng Zhao over unauthorized derivatives
In brief
- 1,700 UK investors filed suit against Binance in London High Court over unauthorized derivatives sales
- Binance marketed complex products from late 2019, two years before FCA retail ban in 2021
- Lawsuit seeks at least £150 million in damages; some investors report tens of thousands in losses
- Binance Holdings Ltd, Nest Exchange, and Changpeng Zhao named as defendants
The lawsuit and damages claim
The claim seeks at least £150 million, roughly $200 million, in damages. The High Court action names Binance Holdings Ltd, which is based in the Cayman Islands, alongside UAE-registered entity Nest Exchange and Changpeng Zhao, with a total of 1,692 claimants. Some of the claimants report losing tens of thousands of pounds on these products.
The legal theory is straightforward. Selling leveraged crypto derivatives to UK retail customers without FCA authorization violates the Financial Services and Markets Act. In 2021, the regulator formally banned the sale of crypto derivatives and exchange-traded notes to retail consumers, citing unacceptable risk levels. Binance's conduct predated that ban by two years, but claimants argue the exchange should have known the products posed unacceptable risk to ordinary investors.
Zhao's legal troubles and regulatory headwinds
Changpeng Zhao pleaded guilty to federal charges related to anti-money laundering violations in late 2023, resulting in a $4.3 billion settlement. He served a four-month prison sentence and stepped down as CEO. Richard Teng has since replaced him. This UK lawsuit arrives as Binance navigates additional pressure: the exchange has encountered setbacks in Europe regarding licensing under the Markets in Crypto-Assets (MiCA) regulatory framework.
The timing compounds Binance's regulatory exposure. A successful claim—even partial—would establish liability for selling complex financial products across borders without local authorization. That precedent could reshape how crypto exchanges manage retail distribution globally.
Binance's defense
Binance has publicly stated it intends to defend against the claims vigorously while maintaining its commitment to complying with applicable laws. The company hasn't detailed specific defenses yet. What's clear: this case tests whether cross-border crypto exchanges can be held accountable under traditional financial services law—a question regulators worldwide are watching closely.
