Hundreds of cryptocurrency traders on the leading crypto exchange, Binance, are set to take part in arbitration proceedings against the exchange for the losses they suffered during a major outage on the platform.
According to a CNBC report, hundreds of agitated Binance users who lost millions of dollars due to a major outage on the platform on May 19 are demanding that the exchange refund them.
The May 19 Saga
The crypto industry has always been known for its extreme volatility. May 19 saw several cryptocurrencies suffer a massive drop, with ETH being one of the worst-hit coins.
Several Binance users who saw the decline tried as much as possible to liquidate their positions before it was too late but they discovered that the platform had experienced a major outage on that day.
One of the victims, a Canadian crypto trader, Fawaz Ahmed, noted that he felt helpless and could only watch as his position got wiped out with the major bear market, bringing his losses to a whopping $6 million.
He said,
“This loss was not fair. This is something which was out of my control.”
This trader added that the customer service team at Binance gave the affected traders a compensation offer that was “absurdly” low in comparison to their losses.
Enraged by this, the traders decided to seek damages from Binance via arbitration proceedings. However, since Binance has made it clear that it has no physical headquarters, the traders were confused about how and where to take it to court.
Recently, though, a private equity firm, Liti Capital, has pledged to provide a $5 million fund to support the case.
The arbitration is set to take place in the Hong Kong International Arbitration Centre, where Binance had stipulated in its terms of use that any legal dispute be settled.
The funding from Liti Capital will cover the expenses involved in pursuing this case. They have also hired the New York-based law firm, White & Case to represent the affected traders.
In a comment, Liti Capital’s Chief Investment Officer, Daniel Kay said,
“This is a landmark case for the industry… This will be the largest consumer international arbitration in history.”
Binance Responds
While the exchange declined to comment on any pending legal matters, a spokesperson noted that it will not compensate users for any “hypothetical profits”.
They said,
“Our policy is fair in that we compensate users who experienced actual trading losses due to our system’s issues. We do not cover hypothetical ‘what could have been’ situations such as unrealized profits.”
Binance has recently been besieged by legal actions from all angles. The company is currently facing trade restrictions and lawsuits from various financial regulators.
The exchange’s CEO, Changpeng Zhao, has even agreed to step down as CEO if Binance gets a senior compliance officer with a strong regulatory background and is capable of leading the exchange.
This new case represents an addition to the legal woes the exchange is currently facing.
