New York-based Law Firm To Represent Crypto Traders Seeking Damages From Binance
When the Binance cryptocurrency trading platform wasn't accessible on May 19, crypto traders with active positions paid the price. For instance, Fawaz Ahmed, a Canadian crypto trader, made a loss of roughly $6 million from his Ethereum position on the exchange.
Speaking to CNBC, the trader observed that the loss "was not fair" since Binance's outage for about 60 minutes was beyond his control. However, when he reached the exchange's customer service, they offered him an unattractive compensation.
Ahmed is one among many who suffered on the fateful day. However, the traders are likely to take the arbitration route against Binance, the leading global cryptocurrency exchange.
A Binance spokesperson clarified that the crypto trading platform only pays users for real and not "hypothetical" losses. The spokesperson further noted that the exchange is not open to compensate for unrealized profits. While the virtual currency traders may be bent on taking the matter to court, they have a problem, Binance has no headquarters.
Despite Being a Global Crypto Exchange, Crypto Traders Can Only Take it to Court in Hong Kong
However, this has been made simpler by Liti Capital. The firm disclosed that it's open to financing the case where approximately 1,000 traders are presumably affected. Interestingly, the only place where this can happen is in Hong Kong.
According to Liti Capital's CIO, David Kay, Binance has listed Hong Kong as the only place "they have jurisdiction." Kay added that if it goes through, it will enter history books as "the largest consumer international arbitration."
The Liti Capital executive noted that Aija Lejniece, a lawyer engaging with cryptocurrency traders in France, ignited their involvement in the matter.
Note that an arbitration seeks to find a solution to a dispute out of court. As such, an average Binance user may find it hard to make a claim since they are liable for arbitration charges, travel costs, and other fees that may arise.
To make it bearable for affected Binance users, Liti Capital has offered not less than $5 million to fund the process. On the other hand, a New York-based law firm, White & Case, will represent the disgruntled crypto traders. Among the claimants' lawyers is one of the law firm's partners based in Hong Kong.
Binance Bows To Regulatory Pressures, Promises to Work "Collaboratively With Policy Makers"
As White & Case prepares to take on Binance in Hong Kong, the exchange seems to have yielded to regulatory pressure. Binance announced that it would require new users to go through a strict know-your-customer evaluation on curb money laundering.
The development comes after mounting pressure from financial watchdogs in Japan, Germany, and Britain. Binance's holding firm has its headquarters in Cayman Island. Among regulators that noted that Binance doesn't follow laws on anti-money laundering were Christine Lagarde, ECB (European Central Bank) 's president.
According to Changpeng Zhao, the exchange's CEO, Binance is ready to "work more collaboratively with policy-makers" to not only enhance global standards but also "discourage bad actors."