Nearly 1,700 UK investors sue Binance, Changpeng Zhao over unregulated derivatives
In brief
- Nearly 1,700 UK investors sue Binance and Changpeng Zhao for £150 million in London High Court
- Binance allegedly offered leverage tokens, futures, and options without FCA approval after January 2021 retail ban
- Customer Tomas Sutas lost entire £100,000 investment in derivatives before restrictions took effect
- FCA revoked Binance's UK operating license in June 2021
Alleged Regulatory Violations
The lawsuit centers on Binance's leverage tokens, futures contracts and options offerings, which the plaintiffs claim breached UK financial law. The Financial Conduct Authority had banned such products from being offered to retail customers in January 2021. Yet Binance continued to offer these products after the ban took effect.
There appeared to be no effective barrier preventing UK customers from accessing the restricted offerings. This gap allowed retail investors to trade high-risk derivatives products without the protections the FCA intended to enforce.
Customer Losses and Timeline
One affected customer, Tomas Sutas, was a financial controller who invested more than 100,000 British pounds ($132,400) into Binance's derivatives products before losing the investment. His case exemplifies the broader pattern. Multiple UK users lost tens of thousands of pounds through the products.
Binance's UK operations became heavily restricted in June 2021 when the FCA informed Binance Markets Limited it could not operate without written consent. The exchange had also recently failed to secure a Markets in Crypto-Assets-compliant license from an EU member state before the July 1 deadline.
Representation and Context
The law firm KP Law is representing the investors in the lawsuit. Binance has faced multiple regulatory pressures in recent years. The exchange has also been facing allegations that it facilitated $850 million in transactions tied to a sanctioned Iranian financier. Binance strongly denied the allegations regarding Iranian transactions.
The UK lawsuit adds to the growing list of regulatory and legal challenges facing the world's largest crypto exchange.
