Court rejects Binance’s challenge of OSC investigation

By James Langton | September 29, 2023 | Last updated on September 29, 2023
3 min read
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Ontario’s Superior Court of Justice has declined to quash the Ontario Securities Commission’s (OSC) investigation into crypto giant Binance Holdings Ltd., saying the company should take its challenge of an investigative summons to the regulator’s tribunal.

The court rejected an application brought by Binance seeking a judicial review of an OSC investigation order and summons issued in May.

According to the court’s decision, the company argued, among other things, that an undertaking between the firm and the regulator in 2022 precluded the launch of an investigation, and that the accompanying summons was too broad. The company said the summons breached the protection against unreasonable search that’s contained in the Charter of Rights and Freedoms.

According to the court’s decision, the OSC began an investigation into Binance after the U.S. Commodity Futures Trading Commission (CFTC) filed a complaint against the company, and the company was less than fully cooperative with the OSC in fulfilling the terms of the undertaking.

“From the standpoint of OSC staff, Binance was not very responsive, and when responses were received they were incomplete,” the court noted.

As a result, the OSC launched an investigation to determine whether the company had violated securities law — including whether it had traded without registration, distributed securities without a prospectus, misled the OSC, or circumvented the terms of the undertaking. The regulator also issued a summons demanding certain information from the company.

Binance then immediately announced it would withdraw from Canada, and asked Ontario’s Capital Markets Tribunal to revoke the investigation order.

In June, the panel ruled that it didn’t have jurisdiction to revoke the OSC’s order, leading the company to seek a judicial review.

According to the court’s decision, Binance argued that the terms of the 2022 undertaking with the OSC amounted to a settlement and do not permit the investigation. Further, it argued, the investigation order represents an abuse of process by the regulator.

“Binance submits that it would be manifestly unfair and contrary to the interests of justice to permit the investigation to proceed, given the agreement made in the undertaking,” the court said.

However, the court found that the investigation doesn’t violate the terms of the undertaking, and that while there is some overlap between the issues covered in that agreement and the investigation order, the order goes well beyond those issues.

It also found that the agreement preserved the right of the OSC to investigate suspected misconduct, including whether Binance made misleading statements to the OSC.

“The undertaking contains an express, broad, reservation of rights, under which the OSC retained the right to bring enforcement proceedings for any past, present or future conduct contrary to the Act or the public interest. The exception to that reservation does not apply here,” the court ruled. “Binance has not shown that the investigation order is precluded by the undertaking, let alone that it is an abuse of process.”

Ultimately, the court declined to quash the investigation order.

On the question of whether the summons issued by the OSC breached the Charter — by demanding broad disclosure that, Binance said, would violate privacy protections — the court declined to rule on that issue, concluding that the issue should first be dealt with by the tribunal.

“A Charter challenge should be raised before the administrative decision-maker and it would come to this court with the related evidentiary record and analysis,” it said.

“In short, the law shows a lowered expectation of privacy in the securities industry, not no expectation of privacy, and we do not have a record to proceed differently based on evidence. Next, we do not have reasons that sufficiently assist us on how the balancing of rights was done, assuming that it was done… Lastly, there appears to be a route available to Binance to raise the Charter issues at the OSC,” it said.

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James Langton

James is a senior reporter for and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.