Malta crypto poster-boys Binance hit by US class action over ‘Wild West’ sales

New York class action strikes best-known companies in the crypot world as well as Binance, the crypto-trading giant which gave life to Founders Bank, the world’s first decentralised bank in Malta

Binance CEO Changpeng Zhao
Binance CEO Changpeng Zhao

Founders Bank is not a licensed institution - see right of reply

A coordinated strike against some of the best-known companies in the cryptocurrency has also targeted Binance, the crypto-trading giant which gave life to Founders Bank, touted as the world’s first decentralised bank in Malta.

A US law firm filed class-action lawsuits which could represent tens of thousands of investors, aimed at Binance,, Bitmex, Tron and others, accusing them of having sold unlawful securities to investors in the form of digital tokens.

As reported by Offshore Alert – calling it the crypto world’s own ‘red wedding’ in a Game of Thrones reference – the 11 suits named 42 defendants in more than a dozen countries, including Binance founder Changpeng Zhao, better known as “CZ”.

The lawsuits allege that the token issuers took advantage of the market’s lack of understanding of how cryptocurrencies worked to sell these alleged illegal securities to US citizens.

“In 2017 and 2018, at the height of this frenzy of activity, hundreds of ICOs (initial coin offerings) raised nearly $20 billion with virtually no regulatory oversight or guidance to investors. Issuers and exchanges like Binance, preying on the public’s lack of familiarity with the technology underpinning these tokens, characterized these tokens as ‘utility tokens’, even though they were in effect bets that a particular project would develop into a successful venture. In truth, these tokens were securities under federal and state securities laws.”

The plaintiffs’ lawyers described the ICOs as a ‘Wild West’ where investors are left to fend for themselves.

The plaintiffs are seeking damages for being sold assets that are not securities under US federal law. The damages being sought are not quantified in the actions. Binance declined to comment.

The suit against Binance claims the crypto exchange sold securities without a licence and that, like the other defendants, wrongfully engaged in millions of transactions without registering the tokens as securities – and without Binance registering with the SEC as an exchange or broker-dealer.

“The scheme worked as follows: working to capitalize on the enthusiasm for cryptocurrencies like bitcoin, an Issuer would announce a revolutionary digital token… This token would typically be billed as ‘better, faster, cheaper, more connected, more trustworthy and more secure’.

“The issuer would then sell some of its tokens in an initial coin offering to a small group of investors and then turn to Binance to list the new token, at which point Binance would undertake its own efforts to promote sales, and to solicit and encourage purchases, by a wide universe of investors.

“The issuers would thereby raise hundreds of millions, even billions, of dollars from purchasers of the tokens. Binance would profit handsomely as well by receiving a percentage of each trade and by receiving substantial payments from Issuers to have their tokens listed.”

The plaintiffs say the promises of new products and markets went unfulfilled, with investors left holding the bag when these tokens crashed, now at a tiny fraction of their 2017-2018 highs.

“Investors were provided with scant information when deciding whether to purchase a token. In fact, often the only offering materials available to investors were ‘whitepapers’ that would describe, in highly technical terms, the supposed utility of a token. These whitepapers would often omit, however, the robust disclosures that the securities laws and the SEC have long codified as essential to investor protections in initial public offerings, including use of ‘plain English’ to describe the offering.”

Right of reply - MFSA

Whenever a licence or authorisation is granted to a banking institution, the name and details of the institution will be published in the Financial Services Register on the MFSA’s official website  A quick search in the MFSA’s Financial Services Register will immediately show that Founders Bank does not feature in the list of licensed banking institutions. The Malta Financial Services Authority (MFSA) wishes to refer to the Public Statement that it had issued last February stating that Binance is not authorised by the MFSA to operate in the crypto currency sphere and is therefore not subject to regulatory oversight by the MFSA.