By Alicia Maher
Leading crypto exchange, Binance, has had an eventful year, ladened with regulatory troubles, sanctions and a host of other unsavoury events. This time around the crypto exchange is getting sued for causing immeasurable losses to futures traders due to a series of system failures on its platform.
According to reports, losses running into millions of US dollars were incurred by these traders. This is not the first legal controversy of a similar nature that Binance is facing. In July, a group of Italian traders filed a ‘class action’ against Binance for exactly the same reason- losses were incurred on open positions in Binance’s Futures section during a volatile period in February. These traders had claimed that Binance was responsible for a spate of liquidations as the market was under severe volatility at the time.
The latest lawsuit which has Binance as the defendant has received backing from a venture capital firm, Liti Capital, as it pledged a sum of $5 million in support of the case. New York-based legal outfit, White & Case, has been contracted to represent the affected parties.
System Outages Plagued Binance Platform in May
Binance’s platform had experienced severe system outages in May, preventing traders from exiting their open positions. The outages had occurred as the crypto market went on a volatility spree in May, during which the prices of flagship cryptocurrency, Bitcoin and altcoins reached their all-time highs.
Also, during this period, a Canada-based crypto trader, Fawaz Ahmed equally got liquidated on Ethereum to the tune of $6 million. The altcoin’s price was on the rise then, until Ahmed noticed that the price was retracing. It became difficult for the trader to exit his position on ETH as the entire Binance platform suffered system failure for an hour. Featuring on news and media outfit, CNBC, Ahmed complained bitterly, while claiming that Binance had offered a ridiculous compensation for their losses.
While it may be difficult to get adequate compensation from Binance as it has no definite headquarters, the traders are not backing down on their lawsuit. Legal representatives of the affected parties in the July class action argued that the outages were not isolated incidents, given that they occurred somewhat consecutively. As such, they claimed Binance could not absolve itself of responsibility.
Binance Slugs it Out with Regulators
Meanwhile, Binance has had a lot to deal with lately. The latest controversy it finds itself in adds more troubles to the exchange’s Pandora box. In the wake of pressures it faced from regulatory bodies, Binance closed operations in the UK, following an order from UK’s Financial Conduct Authority (FCA). Regulators in Cayman Islands, the US, Canada, South Korea have also issued directives on regulatory compliance to Binance in the last two months.
Fortunately for the exchange, it reconsidered its stance on regulations at a press conference in early August. At the conference, Binance’s CEO, Chanpeng Zhao (CZ) pledged to cooperate with regulators while assuring users of stable operations. Binance also introduced new policies in relation to trading activities on its platform, including tax reporting guidelines.