Executive Summary: Key Legal and Evidentiary Issues

• Binance was alleged to have sold cryptocurrency derivatives to Canadian investors without registration or a prospectus, contrary to securities laws.

• The plaintiffs claimed both statutory remedies under the Ontario Securities Act and common law remedies such as rescission for illegal contracts.

• The motion judge certified the class action, finding that the claim disclosed valid causes of action and raised issues common to all class members.

• Binance appealed, arguing the claim was legally defective and that commonality was not met, especially regarding the remedy of rescission.

• The Court of Appeal upheld the certification, emphasizing that the statutory claim was not certain to fail and that rescission could be resolved on a class-wide basis.

• The appeal was dismissed, and Binance was ordered to pay $30,000 in costs.

Background and nature of the claim

The case stems from a proposed class action initiated by Canadian investors Christopher Lochan and Jeremy Leeder against Binance Holdings Limited and its related entities. The plaintiffs alleged that Binance operated an online platform selling cryptocurrency derivatives—futures, options, and leveraged tokens—without registering with the Ontario Securities Commission (OSC) or filing a prospectus, contrary to the Ontario Securities Act (OSA) and other provincial securities laws.

Between September 2019 and the date of certification, Canadian investors were able to trade these derivatives through Binance’s website. According to the plaintiffs, Binance’s conduct amounted to the illegal distribution of securities. They sought rescission and damages under s. 133 of the OSA or alternatively at common law.

Certification and lower court decision

The motion judge certified the proceeding under section 5(1) of the Class Proceedings Act, 1992. He held that the claim met the low threshold of pleading a reasonable cause of action, both under the OSA and at common law. Relying on decisions of the Capital Markets Tribunal, the judge accepted that crypto derivatives are “securities,” and Binance’s sale of such products without registration or prospectus was a legally actionable breach.

Regarding the common issues requirement, the motion judge found there was “some basis in fact” to support the plaintiffs' argument that class members entered into uniform contracts with Binance, making remedies like rescission applicable across the class. He rejected Binance’s argument that the contracts were between users, not Binance, and noted the evidence showed standard-form contracts between users and the platform.

Appeal and legal arguments

Binance appealed, arguing three core errors: (1) the statutory and common law claims were invalid or insufficiently pleaded; (2) the commonality requirement was not met, particularly for rescission; and (3) those errors tainted the judge’s analysis of other certification elements. Binance also argued that users were counterparties to each other, meaning rescission would create inter-class conflicts.

The Court of Appeal dismissed all grounds of appeal. It found that it was not “plain and obvious” the statutory claim under s. 133 would fail, even if no prospectus had been filed. The court distinguished older case law like Jones v. F.H. Deacon Hodgson Inc. and held that denying remedies in more serious non-compliance cases (i.e., where no prospectus was filed at all) was inconsistent with the OSA’s protective purposes.

The court also upheld the existence of a common law cause of action for illegality, consistent with Jones, and rejected Binance’s view that class members were engaged in illegal trades themselves.

On the commonality issue, the court emphasized that the threshold is low and the plaintiffs had shown some factual basis for their position. Conflicts in the evidence were for trial, not certification.

Outcome

The Ontario Court of Appeal upheld the certification order. It confirmed that the statutory and common law claims were viable at this early stage and that issues of liability and remedy could proceed on a class-wide basis. The appeal was dismissed with costs of $30,000 awarded to the plaintiffs. This decision marks a significant moment in applying securities law to cryptocurrency platforms and affirms access to justice through class actions in financial regulatory contexts.