Ontario’s Superior Court of Justice has certified a class action against crypto trading platform Binance Holdings Ltd.

The action seeks damages from Binance on the basis that it allegedly violated securities law by selling crypto derivative products to retail investors while unregistered. The action also seeks the rescission of those trades.

“[The plaintiffs] claim that those sales were illegal and void for failure of the defendants to register as required under [securities law] or to file a prospectus,” the court noted in its decision.

None of the allegations have been proven.

In certifying the class action, the court noted that regulators have found crypto contracts to be securities or derivatives, and that the marketing of these contracts has been treated as a distribution under securities law. As a result, the court found the plaintiffs have a potentially viable case.

“The plaintiffs have met the evidentiary burden on them of establishing some basis in fact that the issues raised in the four liability questions are common across the class,” the court said. In other proceedings, “Binance has already been found by Ontario courts to have operated the Binance website platform and to have made it available to Canadian users.”

Amid scrutiny from the Ontario Securities Commission (OSC), Binance promised to stop dealing with Canadian investors in mid-2021, and in early 2022, it agreed to an undertaking with the OSC, promising to block investors in Ontario from trading and eventually wind down its operations in the province.

In 2023, the OSC began investigating possible regulatory breaches by the company. That investigation is ongoing, the court said, and the OSC has not brought any allegations against the firm.

Separately, Binance settled with U.S. derivatives regulators, paying more than US$2.7 billion in fines and disgorgement while admitting to violating U.S. law.

In the proposed class action on behalf of Canadian investors, the Ontario court considered whether plaintiffs could seek rescission of their crypto trades that took place on the Binance platform as a remedy for the entire class of investors.

Binance argued investors traded with one another and that it was not a party to these transactions, so rescission was not a viable remedy.

The court rejected that argument. “One would think that if it is the defendants’ view that Binance website users contract with each other and that Binance is only a medium for these contracts, then they could produce at least one such contract,” the court said. “But the only contracts found in the record are between class members and Binance itself.”

The court concluded investors traded directly with Binance, leaving open the possibility of rescission as a remedy. “The relationship between Binance users and Binance is more like that of a customer to a store, with no contractual relationship between the retail buyer and the store’s supplier,” the court said.

The court also concluded that damages, interest and costs could be evaluated on a class-wide basis in this case.

Investors who purchased cryptocurrency derivative contracts from Binance beginning on Sept. 13, 2019 are considered members of the class.