Binance group action grows to 2,700 claimants as KP Law puts claim above £250m

The group action against the cryptocurrency exchange Binance in the High Court has more than doubled in size since it was issued in June. KP Law, the claimant firm running the case, said on Tuesday that over 1,000 further consumers in England and Wales have joined, taking the claimant group to approximately 2,700 and the estimated value of the claims issued to date above £250m.

The claim was filed at the end of June on behalf of 1,692 retail investors and was then valued at about £150m. A claim of this size and complexity is heard on the multi-track, and group actions of this kind are commonly backed by third-party litigation funding, a market that is itself awaiting reform. It is brought against Binance Holdings Limited, Nest Exchange Limited, the exchange’s founder Changpeng Zhao and persons unknown operating the Binance trading platform.

What is alleged

The claimants say that from late 2019 Binance made complex derivative products available to retail users in the UK, including leveraged tokens, cryptocurrency futures and options and margin trading, and promoted them through campaigns, online material, social media and email. Their case is that these products are specified investments under the Financial Services and Markets Act 2000, that only an authorised or exempt person could lawfully sell them to UK consumers, and that Binance was neither.

The Financial Conduct Authority issued a consumer warning in June 2021 stating that Binance Markets Limited, the group’s UK entity, was not permitted to undertake any regulated activity in the UK. In its supervisory notice the regulator said the firm had not provided basic information about its business and that the group was not capable of being effectively supervised. Binance Markets Limited later cancelled its FCA permissions at its own request.

The claimants are all retail investors rather than professionals. KP Law says many lost tens of thousands of pounds and some lost millions.

Hannah Sharp, the KP Law partner leading the claim, said: “It is public knowledge that Binance have failed to cooperate with regulators. That’s why their UK group company, Binance Markets Limited, was barred from regulated activity in the United Kingdom in 2021. Sadly, this prohibition did not stop Binance from selling our clients crypto derivative products we allege they were not at the time authorised to sell in this market.”

Binance’s position

The allegations have not been tested in court. When the claim was issued in July, Binance said it would defend it and described compliance with UK regulation as a priority. The exchange, which says it has more than 300 million customers worldwide, has not commented on the enlarged claimant group.

Timing

The announcement lands a day before the FCA is expected to open its authorisation gateway under the UK’s new cryptoasset regime, on 30 September. Binance is widely expected to apply. Ms Sharp said the firm “will be watching closely as the FCA considers Binance’s expected application for a UK cryptocurrency licence”.

KP Law describes itself as a specialist in group actions against large corporations, a model that depends on the kind of alternative fee arrangements that sit outside the billable hour, representing more than half a million clients across product liability, financial services, data breach and equal pay claims. Its other current cases include a claim against Johnson & Johnson over talc and a claim against Google over online display advertising.

The case is Claimants v (1) Binance Holdings Limited, (2) Nest Exchange Limited, (3) Changpeng Zhao and (4) Persons Unknown.