Financial Times reported that a group of investors, which claims multimillion damages after a Binance service outage, has raised $5 million to sue the crypto exchange. However, the case will likely be complicated by the ambiguous legal status of Binance. Binance has explained the crash due to technical problems, engaging with users affected by the outage.
Traders, who suffered losses due to a Binance platform malfunction during the May 19th Bitcoin cryptocurrency crash, are forging ahead with a lawsuit. As the Financial Times reported, six traders have gotten $5 million in backing from the Swiss litigation funding firm Liti Capital in an expensive battle to recover money lost due to Binance’s glitch, which prevented them from selling off their assets before it’s too late.
The $20 million of collective damages that the investor group is claiming stems from an episode in May when Binance’s trading platform crashed amid volatile crypto markets. Some traders who had taken out leveraged crypto positions saw their accounts forcibly liquidated – without any ability to sell out of the position.
“This loss was not fair,” Ahmed, a 33-year-old who trades full-time, told CNBC. “This is something which was out of my control.”
Binance has attributed the service freeze to technical problems and said it took “immediate steps to engage with users affected by the outage.”
As reported by the Wall Street Journal, around 700 frustrated investors joined forces and coordinated their strategy over the Discord app, engaging independent Paris-based arbitration attorney Aija Lejniece who then reached out to Liti Capital for assistance with financing the case. The group believes the 700 member group may have lost a combined $100 million. The Swiss-based litigation financing firm, which takes a 30% contingency fee, has pledged to cover $5million toward the case.
Yet, the case will likely be complicated due to Binance’s terms of service. Binance doesn’t have a headquarters and only allows arbitration through the Hong Kong International Arbitration Center. To get a single hearing, one must pay a $65,000 fee, and Binance’s terms of service state people can only arbitrate individually.
Binance wasn’t the only crypto exchange to face disruption to its service on May 19. Coinbase users were also temporarily unable to access its site. Bitcoin plunged as much as 30% to nearly $30,000 that day. It has since raised to over $45,000.