The cryptocurrency exchange Binance recently filed a document with the U.S. federal court on May 16, requesting the judge to compel all plaintiffs in a class action lawsuit accusing the exchange of selling illegal securities to resolve disputes through arbitration. Binance argues that this group of users waived their right to sue in a class action by agreeing to the company's service terms.
According to documents submitted to the federal court in New York, Binance emphasized that the terms of use updated in February 2019 included provisions binding users to bring all claims to arbitration, while also prohibiting class action lawsuits.
"The court should rule that plaintiffs are required to resolve disputes arising after February 20, 2019, through arbitration, even if the court maintains its original decision regarding claims before that date. The class action waiver in the 2019 terms of use must be enforced for all plaintiffs' claims," Binance stated in its petition.
Controversy over the validity of the arbitration clause
Earlier in March, Judge Andrew Carter dismissed Binance's request to move all claims in the class action lawsuit to arbitration for users who purchased tokens from April 1, 2017, to February 20, 2019. For cases after 2019, the judge only partially accepted the request and is reviewing the applicability of the arbitration clause in the new terms of use.
Binance argues that the version of the terms of use prior to 2019 also included provisions allowing the exchange to unilaterally change terms without individual notice to each user, meaning that the update of the 2019 terms was legal and effective for all users.
Complex legal developments lasting for many years
This class action lawsuit was previously dismissed in March 2022 when Judge Carter agreed with Binance's argument that the company was not bound by U.S. securities law due to not having a physical presence in the country.
However, in March 2024, the U.S. Court of Appeals for the Second Circuit reversed this ruling and restored the lawsuit. Subsequently, the U.S. Supreme Court declined to hear Binance's appeal last January.
Other legal troubles
In addition to the lawsuit in the U.S., Binance is also facing various other legal troubles. Since mid-2023, the U.S. Securities and Exchange Commission (SEC) has sued Binance for selling unregistered securities. This case was resolved with a record fine of up to $4.3 billion in November 2023.
Most recently, in April 2024, Binance was again hit with a class action lawsuit in Canada, accused of violating securities laws after the exchange announced its withdrawal from the market in May 2023.