Hundreds of investors may take part in proceedings against Binance.
When it comes to trading volume, Binance is the world’s largest digital currency exchange. However, no matter how large it is, Binance isn’t immune to outages.
A Major Outage in May
On May 19, a major outage happened to the platform. For an hour, Binance cryptocurrency traders could not enter or exit their positions.
At that time, Ethereum’s price was dropping. Naturally, traders should get out. But those who used Binance couldn’t do so because of the outage. As a result, they lost.
It wasn’t just Ethereum that suffered a huge drop in prices at that time. Bitcoin, too, posted its biggest one-day drops. The entire crypto market lost around $1 trillion in value.
Those who couldn’t get out of their position in the trading lost millions of dollars.
When traders contacted the company’s service team, they were given a low offer of compensation.
Hundreds of investors may take part in arbitration proceedings against the platform. They are seeking damages for all the money they have lost during the outage.
Binance stated that it will compensate users who experienced losses because of issues with their system. But the company won’t cover those hypothetical situations.
In that case, unrealized profits aren’t covered.
Finding a place to hear the case is quite challenging. The reason for this is that the company has no official headquarters.
In that case, it has no certain jurisdiction. Under the terms of service of the company, all legal proceedings will be done through the Hong Kong International Arbitration Centre. It’s a quasi-judicial body used to address transnational business disputes.
Those who were affected by Binance outages can file a case but it will be bundled into a single arbitration suit to reduce costs. It will also help investors get some of their money back.
A handful of plaintiffs affected by the major outage encourage those who were affected to join the case.
Binance and Its Success
Binance started in 2017. Since then, it has become a successful cryptocurrency platform. It handles complex financial trading in the cryptocurrency markets.
It stated that it handles over a million trades per second. The company generates billions of dollars in user fees.
Because of its success, it’s facing regulatory issues. Currently, the US Department of Justice and IRS are investigating the platform. The United Kingdom blocked it.
Cryptocurrency is volatile. However, there are no laws yet that will protect citizens against this kind of issue.
The potential complainants could be traders from around the world. Some of them are full-time traders while others are trading in their spare time.
Those who traded full-time have lost a lot. Some of them would want to use the money they traded for retirement.
Binance would compensate these traders.
But, as mentioned, they were only offered a small fraction of the money they have lost. And it’s why these traders explored aggressive remedies, like a class action. They want justice and compensation.
But Binance has been optimistic in its response to the allegations.
“We recently learnt of a few users who publicly claimed to have been impacted during a market-wide outage on May 19. Our platform system logs our users’ activities, including unsuccessful attempts to log-on or place an order, so we investigated their cases but could not identify any relevant technical or system issues that impacted their trading.”