A high court in the United Kingdom recently set aside a proprietary injunction that was issued against the crypto exchange Binance. In its application challenging the injunction, Binance said the action had been 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.
Claimant Proceeded Against Binance Without Notice
A United Kingdom high court recently ruled to set aside an interim proprietary injunction against the cryptocurrency exchange Binance. The interim injunction, which required Binance to preserve 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 discharge of an injunction against Binance is one of the first known cases where a cryptocurrency exchange has challenged granting a proprietary injunction. The proprietary injunction, which was granted on October 18, 2022, was issued in respect of 470,904 USDT stablecoins that were traced to Binance user accounts.
However, following the granting of this injunction, Binance applied for the setting aside of the injunction. The crypto exchange argued that the claimant proceeded to seek the injunction without notice. Binance also argued that it was not possible for it to comply with the injunction since it was granted after the funds in question had been moved.
“It was impossible in practice for Binance to comply with the injunction because the USDT in question had been transferred to its central pooled funds address where they had been mixed and dissipated in the ordinary course of its business before it was served with the injunction,” Binance said.
In addition to setting aside the injunction, the high court also ordered the claimant “to pay Binance’s costs of the application on the indemnity basis amounting to £90,000 [$113,685.00].”
Legal Risks for Crypto Fraud Victims
Meanwhile, in the same blog post, the law firm sought to point out the difference between obtaining an injunction against the account owner and serving this “on the exchange as a third party” versus identifying the crypto exchange as a respondent.
The law firm also argued that if an injunction against the cryptocurrency exchange “is inappropriately obtained” and is later “discharged,” this may leave the fraud victim “with a significant adverse costs order.” Therefore, before seeking an injunction, Herbert Smith Freehills, which acts for Binance in relation to the claim, said legal advisers of victims of crypto fraud should first distinguish the position of a crypto exchange from that of other defendants.
They should also consider if there is a proper basis for making an application against the exchange without notice. Legal advisers should see to it that there are identifiable assets when an application is made, the blog post added.
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