Hundreds of investors are expected to take part in proceedings against crypto exchange Binance, seeking damages for money they lost during a major outage.
CNBC reports that Binance said it was unable to comment on “pending legal matters.”
“Our policy is fair in that we compensate users who experienced actual trading losses due to our system’s issues,” a spokesperson for the firm told CNBC. “We do not cover hypothetical ‘what could have been’ situations such as unrealized profits.”
Binance has experienced several outages over the years in times of heightened volatility for virtual currencies. That can be costly for traders, especially when prices are plunging.
And those losses can balloon to millions of dollars when investors make risky bets using leverage, or borrowed money, to augment trades — which, on Binance, is something users do often.
Binance recently cut the maximum leverage customers can take on futures — financial derivatives that oblige investors to buy an asset at an agreed-upon time at a later date — to 20 times from a previous limit of 125 times.
Changpeng “CZ” Zhao, Binance’s boss, has previously said the exchange has no official headquarters. That makes it extremely difficult for investors to figure out how, and where, to take the company to court.
A group of crypto traders hopes to change that. With the help of Liti Capital, a little-known private equity firm providing litigation financing, nearly 1,000 people are expected to join arbitration proceedings in Hong Kong to seek damages from Binance.
Binance’s terms of use say that any legal dispute must be resolved through arbitration at the Hong Kong International Arbitration Centre. Arbitration proceedings, unlike class action lawsuits, aim to settle disputes out of court.
Read more via CNBC
