Binance Faces Class Action Lawsuits Amid Crucial Outages During Bitcoin Crash
Due to a massive Bitcoin selloff as a result of crypto prices crashing back in May, several crypto exchanges including Coinbase, Binance, Gemini and Kraken had technical issues. Now, some investors are filing class action lawsuits to try to recoup their losses, notably against Binance.
Last week, leading Italian independent law firm Lexia Avvocati — in collaboration with the Swiss Blockchain Consortium — was commissioned by a group of Italian and international investors to launch a legal initiative against the cryptocurrency exchange Binance. The class action lawsuit aims to obtain — among other things — damages suffered by investors on the “Binance Futures” platform as a result of the violation of the rules on trading, as well as anomalies relating to the functioning of the trading platform, according to the legal group’s website. The platform has offered derivative financial instruments — “futures” — without being licensed by the competent authority. In addition, the lawsuit cites the lack of information to the investors.
According to Business Insider, Lexia is taking legal action against Binance for trading losses suffered during outages the platform suffered on various days — April 18, May 5, May 19, May 28, June 4, and February 8, which is the day when Tesla announced its $1.5 billion purchase of Bitcoin.
The complainants are alleging that the compensation Binance has offered right now is a “pitiful amount” and has given the company until July 12 to come up with an appropriate offer. They also threatened to seek regulatory help from the European Union and in Switzerland.
In addition, The Wall Street Journal reports that a group of about 700 traders in France are also working with a lawyer to recoup their losses.
On July 7, Binance CEO Changpeng Zhao wrote an open letter following what he deems “the recent hyper-focus on regulation when it comes to Binance.” The letter included the following statement:
“As a four-year-old startup, Binance still has a lot of room to grow. Binance has grown very quickly and we haven’t always got everything exactly right, but we are learning and improving every day. We hope to clarify and reiterate our commitment to partner with regulators, and that we are proactively hiring more talent, putting in place more systems and processes to protect our users.”
Zhao also cites within the letter tangible steps the company will take, including growing its international compliance team; expanding its “already robust compliance partnerships” and localizing its operations and business to comply with local regulations.
“But this lofty vision won’t be possible without the support and guidance of regulators and policymakers who understand that innovation has the most long-term sustainable impact when tempered with frameworks to protect all participants. We humbly welcome more constructive guidance to help us to grow better. We humbly welcome more capable talents and experienced advisors to join us to build better,” he wrote.
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Last updated: July 12, 2021