A crypto trader named Fawaz Ahmed is pursuing legal action against cryptocurrency exchange Binance, claiming that it cost him millions of dollars in lost Ethereum.
Binance Could Find Itself in Court
When Ahmed saw the price of Ethereum slipping, he felt it was time to sell his coins and exit the trading space for a while. Unfortunately, this was not something he was able to do given that the exchange was experiencing a major outage on the day he sought to trade. This was May 19 of last year, a time when crypto prices – along with the prices of several other assets, including stocks and gold – were experiencing heavy vulnerabilities due to the spiking COVID pandemic.
As a result, Ahmed was unable to sell his stash, and saw his personal losses expand greatly. He claims to have lost several million dollars due to the outage, and he feels that Binance should compensate him. In a recent interview, he stated:
This loss was not fair. This is something which was out of my control.
Binance ultimately did go to Ahmed and offered him what he calls an “absurdly” low amount of compensation. Ahmed was not happy about this and has decided to pursue the matter further through legal channels. It is believed that he will be one of many individuals seeking to take heavy action against the crypto exchange and seek arbitration payments.
While Binance said it was unable to comment on “pending legal matters,” it did mention the following in a published statement:
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.
This is not the first time that Binance has experienced such a blackout. The company has endured several over the years, allegedly causing many people to lose out on millions especially when they engage in risky trades.
Another big problem is that Binance does not have an official headquarters, making it difficult for prosecutors and other legal representatives to pinpoint how they can take legal action against the company. However, it looks like a small group of crypto traders is looking to change things up a bit. These traders have joined hands with an organization known as Liti Capital, a small private equity firm in Switzerland. The company provides litigation financing and has announced it will do so for the nearly 1,000 individuals currently looking to seek damages from Binance.
How and Where to Attack?
In an interview, David Kay – the chief investment officer for Liti Capital – explained:
This is a landmark case for the industry… The only place where Binance has said they have jurisdiction is in a Hong Kong international arbitration court. This will be the largest consumer international arbitration in history.