A UK high court recently overturned an exclusive injunction issued against crypto exchange Binance. In its application challenging the injunction, Binance said the action was taken without notice. Binance also said it could not comply with the injunction since it was granted after the fraudulently acquired crypto assets in question were moved.
Plaintiff sued Binance without notice
A UK high court recently decided to overturn an interim ownership injunction against cryptocurrency exchange Binance. The interim injunction, which required Binance to retain a certain amount of cryptocurrency, was issued after a victim of cryptocurrency fraud claimed to have traced the stolen funds to the crypto exchange.
According to a recent post on the law firm Herbert Smith Freehills’ Blog, the lifting of an injunction against Binance is one of the first known cases where a cryptocurrency exchange has challenged the granting of a proprietary injunction. The proprietary injunction, which was granted on October 18, 2022, was issued against 470,904 USDT stablecoins that have been traced to Binance user accounts.
However, following the granting of this injunction, Binance requested that the injunction be revoked. The crypto exchange argued that the plaintiff requested the injunction without notice. Binance also argued that it was unable to comply with the injunction since it was granted after the funds in question were moved.
“It was practically impossible for Binance to comply with the injunction because the USDT in question had been transferred to its central mutual fund address where they had been commingled and dissipated in the normal course of its business before receiving the injunction,” Binance said.
In addition to quashing the injunction, the High Court also ordered the claimant “to pay the costs of Binance’s claim on the basis of compensation amounting to £90,000 ($113,685.00)”.
Legal risks for victims of crypto fraud
Meanwhile, in the same blog post, the law firm sought to highlight the difference between obtaining an injunction against the account owner and its meaning “on the exchange as a third party” versus to the identification of the crypto exchange as the defendant.
The law firm also argued that if an injunction against the cryptocurrency exchange “is improperly obtained” and then “overturned,” it may leave the victim of the fraud “with an adverse costs order. important”. Therefore, before seeking an injunction, Herbert Smith Freehills, who is acting for Binance in the claim, said that legal counsel for victims of crypto fraud should first distinguish between the position of a crypto exchange and that of other defendants.
They must also determine if there is a proper basis to make a claim against the no-notice exchange. Legal advisers should ensure there are identifiable assets when a request is made, the blog added.
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