An Ontario court ordered more than $250,000 in legal costs against crypto trading platform Binance Holdings Ltd., ruling that the company’s effort to block a proposed investor class action was abusive and saying that these kinds of heavy-handed legal tactics should be discouraged.
In November last year, plaintiffs in a proposed class action against Binance sought and received an injunction that blocked the company’s effort to force them into arbitration proceedings in Hong Kong.
The class action, which has yet to be heard in court, alleges that the company violated securities law by trading crypto derivatives without registration, or issuing a prospectus. The case was certified as a class action in 2024, after courts in Ontario rejected the company’s effort to stay the proceedings, arguing that investors’ complaints must be resolved in arbitration, under the terms of its client agreements.
After losing those legal arguments, Binance launched arbitration proceedings in Hong Kong against the plaintiffs in the proposed class action, claiming that the investors breached the client agreement by launching a legal action against the company in Ontario.
The investors then sought an injunction in Ontario to block the arbitration in Hong Kong.
The Ontario Superior Court of Justice granted the plaintiffs their injunction, saying that Binance’s attempt to force the investors into arbitration in Hong Kong amounted to an attempt to subvert the Ontario courts’ rulings, and to undermine the proposed class action.
Now, the court has also awarded the plaintiffs the $261,900 that they sought in costs for bringing the motion to get their injunction.
According to the court, Binance argued that the request for costs was excessive, given that the hearing only took up half a day.
However, the court said that while the hearing was brief, the international jurisdictional issues were complex.
“It took considerable effort to get there, but the hearing itself was short because the plaintiffs managed to show that they had the defendants ‘dead to rights’,” it said.
“By the time the hearing came around, the main challenge for plaintiffs’ counsel was not so much to establish that the defendants were wrong in law; that had become self-evident. Rather, it was to demonstrate just how abusive the defendants’ tactics were. Plaintiffs’ counsel rose to that challenge and succeeded,” the court said.
Indeed, the court noted that the company launched arbitration proceedings in Hong Kong, “on the thinnest of pretexts,” and shouldn’t have been surprised that this manoeuvre was rejected by the Ontario courts.
“[Binance] had already lost their arbitration argument once and were bound to lose it again. Nevertheless, they decided, for whatever reason, to put the representative plaintiffs through the ordeal of more litigation for, as far as I can tell, its own sake,” the court said.
“The defendants’ legal gamesmanship in commencing the Hong Kong arbitration in the face of this Court’s and the Court of Appeal’s prior ruling was vexatious and oppressive to the plaintiffs,” the court said in its decision on costs. “It was found to be an improper collateral attack on the prior Ontario rulings. … It was, in short, an abusive use of the litigation process.”
Given that the plaintiffs had already won a motion on the arbitration issue, and won again on appeal, they shouldn’t have had to face a third legal challenge on the same issue, the court said — nor should the plaintiffs have been threatened with financial consequences in arbitration, based on the fact that they launched a proposed class action in Ontario, it added.
“That approach by the defendants appeared to me to have been aimed not at building a meritorious argument, but at, frankly, scaring the plaintiffs away from their claim,” the court said, adding, “The defendants’ tactics here are to be discouraged.”
It ordered the company to pay the plaintiffs $261,900 in costs.