A significant ruling emerged from a federal court in Manhattan, where U.S. District Judge Andrew Carter determined that customers of Binance, the world”s largest cryptocurrency exchange, can pursue legal action in court regarding allegations of unregistered token sales. This decision comes after customers claimed that Binance sold tokens that significantly diminished in value.
On Thursday, Judge Carter dismissed Binance”s request to compel arbitration for these claims, stating that the exchange failed to properly inform users about modifications to its terms of use. These changes would have mandated arbitration and waived the right to class-action lawsuits. Specifically, the judge noted that there was no clear evidence that Binance adequately communicated these alterations to its users.
The ruling allows customers who experienced losses on seven specific tokens—ELF, EOS, FUN, ICX, OMG, QSP, and TRX—to seek recourse in court. They accused Binance of inadequately warning them about the risks associated with purchasing these tokens, which is a requirement under both federal and state securities laws.
In the past, Carter had dismissed the lawsuit in 2022; however, a federal appeals court later revived it, allowing these claims to proceed. The controversy surrounding Binance”s arbitration clause is notable, as some companies prefer arbitration over litigation due to its potential for confidentiality and reduced costs, as well as the challenges it poses for evidence gathering.
Binance”s founder and former chief executive, Changpeng Zhao, is also implicated in the case. Legal representatives for both Binance and Zhao did not respond to inquiries concerning this decision.
The implications of this ruling extend beyond Binance, as it highlights the ongoing scrutiny of cryptocurrency exchanges and their compliance with securities regulations. Customers have increasingly demanded accountability from these platforms, especially amid the volatile nature of digital assets and the risks involved in trading them.
