Ruling finds reasonable causes of action under Ontario's Securities Act and at common law
The Ontario Court of Appeal has ruled that a judge correctly certified a class proceeding against cryptocurrency trading companies that allegedly traded securities without registering and distributed these securities without complying with the applicable prospectus requirements.
Binance Holdings Limited, Binance Canada Capital Markets Inc., and Binance Canada Holdings Ltd. – the appellants in Lochan v. Binance Holdings Limited, 2025 ONCA 221 – operated an asset trading platform.
Canadian investors purchased cryptocurrency derivative products through Binance’s platform. The respondents filed an action seeking to represent a class of investors who bought these products between Sept. 13, 2019 and the certification date.
The respondents alleged that the prospectus requirements in Canada’s securities laws aimed to ensure that investors would receive full, true, and plain disclosure of all material facts regarding the securities offered.
The respondents argued that this disclosure was especially important for cryptocurrency derivatives, which could involve highly volatile prices and highly leveraged purchasers, magnifying the profits and losses of such transactions.
The respondents claimed that Binance illegally sold securities to the class members and actively, intentionally, and fraudulently concealed its illegal securities trading activities in Canada.
The respondents also said that Binance’s sale of cryptocurrency derivatives amounted to a distribution of securities to Canadian investors without a prospectus in breach of ss. 53(1) and 71(1) of the Ontario’s Securities Act, 1990 (OSA) and equivalent provisions in other Canadian securities laws.
The respondents requested various remedies on the class members’ behalf, including rescission or damages under s. 133 of the OSA and equivalent provisions in other Canadian securities laws or alternatively at common law.
The motion judge certified the proceeding as a class action and made the respondents the representative plaintiffs. He decided that the claim met the requirements of s. 5(1) of Ontario’s Class Proceedings Act, 1992 (CPA).
Binance appealed the certification. Binance alleged errors in the motion judge’s finding that the claim pleaded a reasonable cause of action under s. 5(1)(a) of the CPA and raised common issues under s. 5(1)(c) of the CPA and his findings on the remaining certification criteria.
The Court of Appeal for Ontario dismissed the appeal and upheld the certification of the claim as a class proceeding. The appeal court ruled that the motion judge correctly found that the claim sufficiently pleaded common law and statutory causes of action and made none of the errors alleged by Binance.
Regarding the statutory cause of action, the appeal court held that the motion judge correctly determined that the respondents properly pleaded a cause of action under s. 133 of the OSA because it was not plain and obvious at this stage that this claim was bound to fail.
The appeal court then addressed the common law cause of action. It referred to Jones v. F. H. Deacon Hodgson Inc., 1986 CanLII 2559 (ON SC), which ruled the failure to file a prospectus under s. 53(1) of the OSA violated a common law right of purchasers to set aside a transaction based on illegality.
The appeal court said that the OSA had no clear language – including in the definition of “trade” in s. 1 – showing that the legislature intended to reverse this common law right in the case of a breach of the requirement to file a prospectus.
The appeal court found that the respondents in this case correctly pleaded a common law cause of action. Specifically, the respondents alleged that Binance failed to file or deliver a prospectus and that the class members deserved the common law remedies of rescission and damages alongside the statutory remedies.
Next, the appeal court saw no error in the motion judge’s finding that the respondents established “some basis in fact” for the proposed common issues and for their position that the remedial issues were class-wide in scope since the class members contracted with Binance instead of each other.
Lastly, the appeal court concluded that the motion judge made no error in analyzing the remaining certification criteria.
