Ontario courts continue to reject crypto giant Binance Holdings Ltd.’s efforts to force investors in a proposed investor class action against the company in the province to arbitrate their dispute in Hong Kong.
In 2024, the Ontario Superior Court of Justice certified a proposed class action against Binance on behalf of Canadian investors alleging that the platform traded crypto derivatives without registration and distributed securities without a prospectus, in violation of securities law.
The allegations have not proven.
Binance has repeatedly argued that the proceedings should be stayed, and that investors’ claims should be sent to arbitration before a tribunal in Hong Kong under the terms of its agreement with clients.
So far, the courts in Ontario have rejected that argument, finding that the clause requiring arbitration was void as it’s contrary to public policy.
In 2023, the Ontario Court of Appeal ruled that requiring Ontario investors to resolve claims that average $5,000 in Hong Kong at a minimum cost of $36,000 was unconscionable.
However, the court noted that, despite these rulings, Binance has launched arbitration proceedings against the plaintiffs in the Ontario class action in Hong Kong, using a Seychelles-based company, Nest Services Ltd., as its representative.
Those plaintiffs asked the Ontario court for an injunction to stop the arbitration from taking place in Hong Kong.
“Binance has taken the position that while the rulings by this court and the Court of Appeal may be binding in Ontario, they are not binding in Hong Kong. It also argues that it is Nest, not Binance, that now seeks to take the plaintiffs to arbitration in Hong Kong, and that Nest is not a party to the present action and so is not bound by the rulings in this action,” the court noted.
The court utterly rejected these arguments, saying that none of them are cogent.
“With respect, and to borrow the language of the previous stay ruling, Binance is again attempting to engineer matters to take advantage of the complexity of operating across jurisdictions behind the superficially ordinary appearance of a breach of contract claim,” the court said.
“The pending arbitration commenced by Nest against the representative plaintiffs is little more than a transparent attempt to render Ontario court rulings ineffective. In effect, Binance seeks to grant itself immunity from judgment in any legal process but the one already adjudged to be unconscionable and contrary to public policy — a Hong Kong arbitration,” the court said.
The court noted that, in its arbitration claim, Nest alleged that the plaintiffs launching a legal action in Ontario is itself a breach of the client agreement.
“In other words, the Hong Kong arbitration is parasitic on the Ontario claim; it is designed to characterize the claim in Ontario as being an actionable event in and of itself,” the court said.
“Nest’s true role in bringing the arbitration is not to claim a separate wrong done to itself, but to undermine the plaintiff’s claim in the Ontario action,” the court concluded.
The court called Nest’s “supposed separate identity from Binance and its claim’s supposed distinct legal framing” a façade.
“Binance lost its stay motion and then lost its certification motion in the Ontario courts; it is now trying to recast the case to recoup any eventual monetary losses in a Hong Kong arbitration — the very forum that this Court and the Court of Appeal have said would be unconscionable and contrary to public policy to engage,” it said.
The court also rejected Binance’s argument that the motion to halt the arbitration proceedings is premature.
“The step that Binance says ought to have come first — determination of Hong Kong jurisdiction by a Hong Kong arbitrator — has already been determined to be a non-starter,” the court said.
Ultimately, the court granted the order sought by the investors, “restraining Binance and their owners, shareholders, officers, directors, employees, agents, parents, subsidiaries, affiliates, assigns, and representatives, including Nest … from commencing or continuing arbitration proceedings against the plaintiffs or class members in Hong Kong or elsewhere, or from taking steps in furtherance of such proceedings.”