Can You Sue a Crypto Company for Misleading Disclosure in Ontario?

Can Ontario investors sue a public company over misleading crypto disclosure?

Yes — Ontario law gives investors a specific legal route to sue public companies for misleading statements or omissions in their public disclosure, and that route is available even when the products at issue are cryptocurrencies. In Banach v. Galaxy Digital Holdings Ltd., 2026 ONSC 4534 (CanLII), the Ontario Superior Court of Justice granted leave under the Ontario Securities Act and certified the case as a class action, allowing the claim to move forward on behalf of a defined group of investors.

This decision is a significant development for anyone who bought or sold shares in a public company after relying on disclosure documents that may have understated the risks of digital assets.

What is secondary market liability under the Ontario Securities Act?

Secondary market liability is a special legal framework that lets investors sue public companies — and their officers and directors — for misrepresentations in public disclosure, without having to prove they personally read and relied on the misleading document. Under s. 138.3 of the Ontario Securities Act, a company can be held responsible if its public documents contained a misrepresentation and investors suffered a loss as a result.

The catch is that investors cannot simply file a lawsuit. They must first ask a judge for permission — called “leave” — by satisfying the screening test in s. 138.8. That test asks whether the claim is brought in good faith and whether there is a reasonable possibility of success at trial. This filter exists to weed out frivolous or speculative claims without putting defendants through a full trial unnecessarily.

What did the court find about the alleged misrepresentations?

The court found a reasonable possibility that the company’s public disclosure contained misleading omissions and half-truths about the nature and risks of stablecoins, algorithmic stablecoins, and specific tokens including Luna and TerraUSD. The alleged problem was not just what was said, but what was left out — a pattern sometimes called a “half-truth,” where technically accurate statements create a misleading overall impression.

Materiality — whether a reasonable investor would consider the omitted information important — was assessed by looking at the potential market impact and the overall picture a reasonable investor would form from the disclosure. The court was satisfied that the threshold was met on the evidence before it at this stage.

What counts as a “public correction” in a securities case?

A public correction is a later statement that reveals, directly or indirectly, that earlier disclosure was misleading. It is one of the key ingredients a plaintiff must establish to obtain leave under the Ontario Securities Act. The court applied the factors from Barrick Gold to assess whether statements made after the dramatic collapse of the relevant tokens in May 2022 qualified as public corrections.

The court found that post-collapse explanations and revised disclosures shared the same subject matter as the earlier alleged omissions and were reasonably capable of revealing that the prior disclosure had been incomplete. That linkage — between the earlier misleading picture and the later correcting statement — is what gives rise to the investor’s potential claim for loss.

How does a class action get certified in Ontario securities cases?

Certification under the Class Proceedings Act, 1992 requires the court to be satisfied on five criteria: the pleadings disclose a cause of action, there is an identifiable class, the claims raise common issues, a class proceeding is the preferable way to resolve those issues, and there is a suitable representative plaintiff with a workable litigation plan.

Here, the court found that common issues — including whether the disclosure was misleading and whether there was a public correction — predominated over individual questions. A class action was the preferable procedure because it avoided the inefficiency of many investors each running separate cases on the same core facts. The representative plaintiff was approved and the litigation plan was accepted as workable.

Does winning leave mean the company has been found liable?

No. Granting leave is a screening decision, not a verdict. The court confirmed it was applying the Theratechnologies standard — a genuine but limited filter — and was not conducting a mini-trial. The investors still need to prove their case at trial, including causation and the amount of their loss.

For defendants, this means the ruling does not establish wrongdoing. For investors, it means the legal door is open, but the case is far from over. The significance of this stage is that it confirms the claim is serious enough to proceed and that the class action vehicle is available to pursue it efficiently.

Questions and records to discuss with a lawyer

• What public documents did the company issue during the period you held or traded its shares, and do those documents discuss digital assets or stablecoins?
• Did you suffer a loss after a market event that was later explained or acknowledged in revised company disclosure?
• Are there records of your trades — purchase price, sale price, and dates — that could be used to calculate a potential loss?
• Have you received any notice that you may be a class member in an existing or proposed class proceeding?
• What limitation periods or opt-out deadlines may apply to your situation?

If you have questions about a potential securities claim or want to understand how Ontario’s secondary market liability rules might apply to your circumstances, the team at UL Lawyers is available through our Ontario litigation lawyers to discuss your situation. We also assist clients across the Greater Toronto and Hamilton Area, including through our Toronto litigation practice and Burlington litigation practice.

To get in touch, visit ullaw.ca/connect.

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This article is automated commentary on a public court decision and is for general information only — not legal advice. Decisions rely on facts unique to each case. If you are affected by a similar issue, contact a lawyer for advice specific to your situation.