An Ontario court has denied crypto trading giant Binance’s bid to stay an investigation by the Ontario Securities Commission (OSC) into possible regulatory violations.
The divisional court of the Ontario Superior Court of Justice rejected Binance’s motion for a stay of the OSC’s investigation order and summons, pending a judicial review of a decision by the Capital Markets Tribunal. The tribunal ruled on June 7 that it didn’t have jurisdiction to revoke the regulator’s investigation order and quash the summons.
In the meantime, the court heard a motion from Binance seeking to stay the underlying investigation order and summons issued on May 10 and 11. The order and summons enabled the OSC to investigate whether or not the company complied with its undertakings to regulators.
The court found that Binance did not meet the accepted three-part test for granting a stay: that there’s a serious issue to be tried, that Binance will suffer irreparable harm if the stay isn’t granted, and that the “balance of convenience” favours a stay.
According to the decision, while Binance argued that its challenge raises serious constitutional and Charter of Rights issues, the OSC said the company’s case is weak and that its claim of irreparable harm is speculative. The OSC further argued the real risks are of evidence being lost or destroyed, or a delay in the regulator’s action, which could harm the public interest.
The court found Binance failed to establish that there’s a serious issue to be tried. The ruling also rejected the argument that the OSC’s investigation order represents an abuse of process.
“This submission does not have merit,” the court said, noting that the undertaking between Binance and the OSC “permits the commission to investigate unregistered trading, misstatements to the commission, and other steps to circumvent securities regulation in Ontario.”
“The commission does not require consent or authorization from the subject of an investigation before carrying out its mandate,” it said.
The court also rejected Binance’s arguments that the summons issued by the OSC violates Charter protections against unreasonable search and seizure, or that it violates privacy rights.
“I find that there is no serious issue to be tried arising from the five arguments which Binance intends to make on judicial review,” the court said.
“There is a weak foundation for any argument that the summons in issue was not authorized by law, or that the investigation order under which it was issued is an abuse of process. Further, there is a reduced expectation of privacy in commercial documents relating to a regulated business,” the decision said.
The court also sided with the OSC in finding that Binance’s claims of irreparable harm are speculative, and that given these findings on the first two prongs of the test, “the balance of convenience does not favour granting a stay,” it said in dismissing the motion.
The court will now hear the company’s appeal of the tribunal’s ruling on Aug. 10.