Court Rejects Binance's Arbitration Bid in Unregistered Token Case

A federal judge has denied Binance's request for arbitration in a lawsuit accusing the cryptocurrency exchange of illegally selling unregistered tokens. The case will proceed in court as Binance failed to notify customers about arbitration terms. Binance founder Changpeng Zhao is also named in the lawsuit.

In a decisive legal development, a federal judge in Manhattan has turned down Binance's request to compel arbitration in a lawsuit accusing the cryptocurrency giant of selling unregistered tokens. U.S. District Judge Andrew Carter emphasized that Binance did not adequately inform their customers about changes requiring arbitration, thereby allowing the case to proceed in court.

Judge Carter highlighted the absence of any clear announcement or guidance within Binance's terms of use about arbitration, making the provision unenforceable. Furthermore, the class-action waiver included in the 2019 terms was deemed ambiguous. Alongside Binance, Changpeng Zhao, the exchange's founder and former CEO, also faces allegations in connection with the lawsuit.

The case, which involves accusations related to seven tokens, namely ELF, EOS, FUN, ICX, OMG, QSP, and TRX, initially saw a dismissal in 2022. However, it was revived by a federal appeals court two years later. The plaintiffs argue that Binance did not adequately warn investors of the high-risk nature of their investments as required by law.

(With inputs from agencies.)