A federal judge in New York has ruled that Binance cannot require certain customers to arbitrate claims tied to cryptocurrency losses, allowing part of a proposed class action to move forward in court. The decision was first reported by Reuters.
U.S. District Judge Andrew Carter said customers may pursue claims that arose on or before February 20, 2019. He concluded that Binance did not adequately notify users that it had updated its terms of use to include a mandatory arbitration clause and a waiver of the right to participate in class actions.
Carter wrote that there was no evidence the company clearly “announced” the arbitration provision or directed customers to where such terms could be found. He also determined that the class-action waiver language in Binance’s 2019 terms of use was ambiguous and therefore unenforceable.
The customers have already agreed to dismiss claims that arose after February 20, 2019.
Lawsuit centers on token sales and risk disclosures
The plaintiffs accuse Binance, the world’s largest cryptocurrency exchange, of illegally selling unregistered tokens that later lost much of their value. They argue the company failed to warn buyers that these purchases carried “significant risks,” as required under federal and state securities laws.
The lawsuit involves seven digital tokens: ELF, EOS, FUN, ICX, OMG, QSP and TRX. The customers are seeking to recover the money they paid.
Binance said it would continue to contest the case. “Binance will vigorously defend the limited claims that remain in this meritless case,” a company spokesperson said in response to the ruling.
Changpeng Zhao, Binance’s founder and former chief executive, is also named as a defendant. His attorneys did not immediately respond to requests for comment.
Arbitration clauses are often favored by corporate defendants because arbitration proceedings can remain confidential, may limit discovery and typically cost less than litigation.
The legal battle has already seen several twists. Judge Carter initially dismissed the case in 2022. However, a federal appeals court revived it two years later, sending it back to the district court for further proceedings.
With the latest ruling, at least some of the customers’ claims will now proceed in open court rather than private arbitration.
