Federal Judge Rejects Binance Arbitration Request in Token Lawsuit

A federal judge has denied Binance's request to arbitrate claims from customers alleging the cryptocurrency exchange illegally sold unregistered tokens. The judge ruled claims could proceed in court as Binance failed to notify users of arbitration requirements. The case involves seven tokens and includes Binance's founder as a defendant.

In a landmark decision, a federal judge rebuffed Binance's attempt to compel arbitration for customers who accused the cryptocurrency exchange of selling unregistered tokens that subsequently devalued significantly. U.S. District Judge Andrew Carter ruled that customers could pursue their claims in court, highlighting insufficient notification from Binance regarding arbitration clauses.

The ruling noted that Binance never adequately informed customers about the arbitration clause within its terms of use. Carter expressed that the alleged class-action waiver in Binance's 2019 terms was ambiguous, rendering it unenforceable. Included among the defendants is Changpeng Zhao, Binance's founder and former CEO, although legal representatives did not offer comments at this stage.

The customers involved in this revived lawsuit claim considerable financial losses on tokens such as ELF, EOS, FUN, ICX, OMG, QSP, and TRX, accusing Binance of neglecting to inform them about inherent purchasing risks as mandated by securities laws. Despite an initial dismissal of the lawsuit in 2022, a federal appeals court has given it new life two years later.

(With inputs from agencies.)