Executive Summary: Key Legal and Evidentiary Issues

• Plaintiffs failed to prove the actual existence or loss of the purchased cryptocurrencies.

• The court ruled that credit card insurance coverage did not extend to cryptocurrency transactions.

• Cryptocurrency purchases were deemed cash advances, not "purchases" covered under credit card protections.

• The consumer protection law (L.p.c.) was found inapplicable to crypto transactions under securities and derivatives exclusions.

• No legal or factual link was established between Binance Canada Capital Markets Inc. and the Binance trading platform.

• The bank demonstrated diligence and was not at fault for processing the transactions after explicit client authorization.

Facts of the case and judicial outcome

In the spring of 2022, Souhad Karkouti and May Akkaoui purchased $21,400 worth of cryptocurrencies on the Binance platform using a National Bank of Canada (BNC) Platinum Mastercard. A few days later, they noticed the cryptocurrencies had disappeared from their virtual account. Attempts to resolve the issue with Binance’s customer service were unsuccessful. They then requested a refund from BNC, invoking the credit card’s insurance coverage for purchases. BNC denied the claim, stating that the insurance did not cover cryptocurrency transactions and that such transactions were not subject to protections under Quebec’s consumer protection legislation.

Following this refusal, the plaintiffs initiated legal proceedings in small claims court for $15,000. The defendants were BNC and later, Binance Canada Capital Markets Inc. (BCCM), which the plaintiffs believed was connected to the Binance platform. BCCM contested the claim, arguing it had no operational or corporate link with Binance and had no involvement in cryptocurrency sales.

The court first evaluated whether the plaintiffs had met the burden of proof. Despite presenting credit card statements and a screenshot showing a zero balance in a virtual account, they failed to provide concrete evidence that cryptocurrencies were actually acquired or lost. The court deemed this insufficient to establish the occurrence of a loss.

Regarding the insurance coverage, the court reviewed the terms of the credit card insurance and found that it only applied to the purchase of tangible movable goods. Cryptocurrencies, classified under Quebec civil law as incorporeal property, were excluded. Moreover, the credit card transactions were categorized as cash advances, not purchases, further disqualifying them from insurance protection.

The plaintiffs also sought protection under the consumer protection law, aiming to trigger a chargeback process. However, the court concluded that this legislation did not apply to cryptocurrency transactions because such transactions could fall under securities or derivatives regulation, both of which are explicitly excluded under Article 6 of the law.

On the issue of bank fault, the plaintiffs accused BNC of failing to warn them of the risks and of not blocking the transactions. Evidence showed BNC had flagged and temporarily blocked suspicious transactions, then contacted Mr. Karkouti, who gave express consent to proceed. The court found that BNC had acted diligently and could not be blamed once it received customer authorization.

Finally, the court examined the role of BCCM. The plaintiffs provided no evidence linking BCCM to the Binance platform. The company denied involvement in crypto sales or any affiliation with the platform. The court agreed, ruling there was no legal relationship between BCCM and the plaintiffs.

As a result, the court dismissed the claim against both defendants. However, due to the particular circumstances of the case, each party was ordered to bear its own legal costs.