Executive Summary: Key Legal and Evidentiary Issues

• The Ontario Court of Appeal found the OSC's summons to Binance was unconstitutionally overbroad under section 8 of the Charter.

• Binance's right to judicially review the summons on Charter grounds was improperly denied by the Divisional Court.

• The Commission lacked jurisdiction under section 144(1) of the Securities Act to revoke or vary a summons issued by an appointed investigator.

• There is no constitutional right to challenge a regulatory summons before compliance, though post-compliance oversight remains relevant.

• The summons demanded communications and information beyond what the law authorizes, amounting to an unreasonable seizure.

• All documents obtained under the invalid summons must be returned, and Binance was awarded $15,000 in costs.

Facts leading to the investigation

Binance Holdings Limited, a Cayman Islands corporation, operates a crypto asset trading platform that was accessible to thousands of Ontario users. In March 2021, the Ontario Securities Commission issued a public notice requiring unregistered crypto platforms to begin compliance discussions. Binance, despite its significant Ontario user base, did not initially respond. After being directly contacted by OSC staff in April 2021, Binance entered compliance discussions and claimed to be exiting the Ontario market. However, these assurances proved misleading. Binance failed to restrict Ontario user access and falsely informed users that it was authorized to continue operations in Ontario. These misrepresentations led the OSC to threaten enforcement action, prompting Binance to enter into an Undertaking in March 2022 to restrict Ontario access, cease operations, and engage an independent third-party reviewer. Despite partial compliance, Binance refused to grant the reviewer access to its live database. When further concerns arose, including a related U.S. complaint, the OSC launched a formal investigation.

Issuance of the summons and procedural background

On May 10, 2023, the OSC issued an Investigation Order under section 11 of the Securities Act. The following day, a senior forensic accountant at the OSC issued a summons to Binance under section 13, requiring the production of documents and information. Schedule A of the summons included demands for revenue and account data related to Ontario users and a wide-ranging request for all internal communications regarding Ontario or Canada. Binance challenged the summons as unconstitutionally overbroad. It first applied to the Capital Markets Tribunal to revoke the summons under section 144(1), but the Tribunal ruled it lacked jurisdiction. Binance then brought a judicial review application and sought a stay, which was denied. It appealed both the denial and the Divisional Court’s refusal to consider its Charter arguments. The appeal of that decision and a subsequent Commission ruling confirming lack of jurisdiction were heard together.

The court’s findings on jurisdiction and procedural fairness

The Court of Appeal held that the OSC does not have jurisdiction under section 144(1) to revoke or vary a summons issued by an appointed investigator. The power to issue a summons belongs to the investigator, not the Commission itself, and section 144(1) applies only to Commission decisions. The Court also found no constitutional right to challenge a regulatory summons before compliance, rejecting Binance’s argument that its section 8 Charter rights required pre-compliance review. However, it held that the Divisional Court erred in declining to review the Charter issues. The Divisional Court incorrectly relied on the speculative possibility of administrative relief and failed to assess whether such an avenue was adequate or available.

Charter violation and overbreadth of the summons

The Court of Appeal determined that the summons issued to Binance was an unreasonable seizure under section 8 of the Charter. While regulatory investigations permit some degree of intrusion and involve a reduced expectation of privacy, the seizure must still be reasonable and proportional. The demand for “all communications” over a two-and-a-half-year period between anyone connected to Binance or its related entities, concerning not just Ontario but Canada as a whole, was found to be vastly overbroad. It lacked any foundational link to relevance and amounted to an impermissible fishing expedition. The Court emphasized that even in regulatory contexts, seizures must be tied to a reasonable belief that the requested material is relevant to a legitimate inquiry. The blanket demand failed this standard.

Demands for information versus documents

Three of the summons demands sought information by asking Binance to “confirm” data and “describe” its methodology. The Court acknowledged that section 13 permits the compelled production of documents and testimony, but not written interrogatory responses. Although the Commission argued that it interpreted these demands as relating only to existing documents, the Court cautioned against vague or misleading drafting and discouraged similar language in future summonses.

Disposition and remedy

The Court of Appeal allowed Binance’s appeal and set aside the summons as unconstitutional. It declined to edit the summons, leaving the matter open for the OSC to issue a new, Charter-compliant summons if necessary. The Court also ordered the OSC to return all documents it had received under the invalid summons. Binance was awarded $15,000 in costs, inclusive of taxes and disbursements, as agreed by the parties.