- The investors claim to have lost more than 2.4 million euros following the TerraUSD collapse, which Binance widely advertised as US dollar-backed stablecoin.
- The plaintiffs accuse Binance of conducting social media marketing campaigns before obtaining a regulatory license from the French monetary authority.
Fifteen French investors have joined hands to sue Binance-the world’s largest crypto exchange, over alleged misleading advertisements and fraudulent concealment. The complainants claim that Binance carried out social media marketing campaigns on Instagram and Telegram, when its official registration as a digital financial service was still pending with French authorities.
In May 2022, the Autorité des marchés financiers (AMF), France’s authority responsible for regulating the financial market, granted Binance’s registration to provide crypto-related services in the country. The move made France the first major European nation to give Binance the green light. Binance has since then invested over 100 million euros (US$108 million) in its operations in France, including a partnership with a Paris-based startup incubator Station F.
In response to the allegations, Binance stated that the exchange did not conduct any promotional communications in France before obtaining the license. The plaintiffs reportedly added social media screenshots of Binance activity before obtaining a license, including a Telegram channel called the “Binance French.”
The exchange talking about the alleged misleading Telegram marketing campaigns stated that “Telegram groups are global community forums”, thus allowing users to create as well as join channels voluntarily.
The plaintiffs further in the lawsuit claim to have lost more than 2.4 million euros following the TerraUSD collapse, which Binance widely advertised as US dollar-backed stablecoin. In response to the aforementioned allegation, Binance noted that its communication presents staking with Binance as “safe, and not the underlying tokens.” It further added that it always includes market risk warnings for crypto products and advertisements.
The lawsuit comes amid Binance trying to battle liquidity crunch allegations. Binance has been in the media limelight for the wrong reasons this month. On December 13, Binance registered $1.9 billion of withdrawals in 24 hours and was forced to “temporarily pause” withdrawals of the USDC stablecoin.
The $1.9 billion of withdrawals of tokens based on the Ethereum blockchain marked the largest daily outflow over a 24-hour period for Binance since June 13. A proof-of-reserves report by audit firm Mazars also showed Binance’s holdings of bitcoin exceeded customer deposits on a single day in November.