Federal Judge Rejects Binance Arbitration Bid in Token Lawsuit, Allowing Customers to Pursue Claims in Court - Tekedia

U.S. District Judge Andrew Carter rejected Binance’s motion to compel arbitration in a lawsuit brought by customers who allege the cryptocurrency exchange illegally sold unregistered tokens that subsequently lost value. The judge ruled that Binance did not adequately inform users about changes to its terms of use, specifically the addition of an arbitration clause and class-action waiver, for claims arising before February 20, 2019. Carter found no evidence Binance “announced” the arbitration provision or clearly directed customers to it.

The lawsuit focuses on seven tokens – ELF, EOS, FUN, ICX, OMG, QSP, and TRX – sold without proper disclosure of risks. Plaintiffs are seeking to recover investments lost as the tokens’ value declined. While some claims were previously dismissed and others agreed to be dropped, an appeals court revived the case, leading Binance to attempt arbitration. The judge’s decision to allow the case to proceed in court, rather than arbitration, is significant because it allows for broader discovery and the possibility of class-action certification, potentially increasing pressure on Binance and its founder, Changpeng Zhao.

This ruling represents a setback for Binance, which has faced increased regulatory and legal scrutiny, including a $4.3 billion settlement in 2023. The case highlights the challenges crypto platforms face in enforcing arbitration clauses when users may not have been clearly notified of changes to terms of service. The outcome could set a precedent for how exchanges communicate changes to users and enforce arbitration retroactively.

(Source：Tekedia)