Binance Faces £150M UK Lawsuit as 1,700 Investors Seek Compensation Over Crypto Derivatives

Nearly 1,700 UK investors have filed a lawsuit against cryptocurrency exchange Binance and its founder, Changpeng Zhao (CZ), in London’s High Court, seeking at least £150 million (around $200 million) in damages over alleged unlawful sales of crypto derivatives.

The claimants argue that Binance promoted and sold high-risk leveraged cryptocurrency derivatives to retail investors from late 2019 without the required authorization under UK financial regulations. According to the lawsuit, many retail traders suffered substantial financial losses, with some claiming they lost tens of thousands of pounds after leveraged positions moved against them.

The case could become a landmark legal battle for the cryptocurrency industry, raising broader questions about liability when unlicensed platforms offer complex financial products to retail customers.

The dispute centers on the UK's Financial Conduct Authority (FCA), which prohibited the sale of crypto derivatives to retail investors in January 2021. At the time, the regulator cited the products' extreme volatility, valuation challenges, market abuse risks, and the potential for rapid financial losses. The FCA estimated that the ban would save UK consumers approximately £53 million ($70 million) annually.

The investors allege Binance continued offering these products around the period of the regulatory ban, violating the UK's Financial Services and Markets Act. Under the legislation, financial agreements arranged by unauthorized firms may be declared unenforceable, potentially allowing customers to recover their investments and associated losses.

The lawsuit could test whether consumer responsibility still applies when a financial services provider is accused of operating without proper authorization. While supporters of unrestricted crypto trading argue that investors knowingly accepted the risks of leveraged trading, the claimants maintain that unauthorized firms cannot rely on risk disclosures to avoid liability.

Binance has rejected the allegations and said it intends to defend itself against the claims. In a statement to Reuters, a company spokesperson said the exchange remains committed to complying with applicable laws and fulfilling its obligations to users.

The legal action follows previous regulatory challenges faced by Binance. In 2023, the U.S. Commodity Futures Trading Commission accused Binance and CZ of operating an illegal crypto derivatives exchange that allegedly served U.S. customers despite restrictions. Later that year, Binance and Zhao pleaded guilty as part of a $4.3 billion settlement with U.S. authorities, one of the largest enforcement actions in the history of the cryptocurrency industry.

The UK lawsuit names Cayman Islands-based Binance Holdings, UAE-based Nest Exchange, and several unidentified operators as defendants. Changpeng Zhao is also named personally in the claim. However, Binance's multinational corporate structure could complicate enforcement if the UK court ultimately rules in favor of the investors.

The timing is particularly significant as Binance continues reshaping its international operations after withdrawing its European Union licensing efforts. The company now primarily operates under regulatory authorization in the United Arab Emirates.

Legal experts believe the outcome could have implications beyond the UK. If the court determines that unauthorized crypto derivatives contracts can be voided, it may establish a precedent affecting cryptocurrency exchanges serving retail investors in multiple jurisdictions. Such a ruling could reshape how regulators and courts assess responsibility when digital asset platforms offer complex financial products without the necessary approvals, potentially influencing future crypto regulation worldwide.