Hundreds of investors are joining together to file suit against Binance, seeking damages for the money they lost when the cryptocurrency exchange went offline on May 19 due to a prolonged power outage.
Binance has experienced several power 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.
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.
Binance wasn’t the only cryptocurrency exchange to face disruption to its service on May 19. Coinbase users were also temporarily unable to access its site. Bitcoin plunged as much as 30% to nearly $30,000 U.S. that day. It has since recovered to $45,790 U.S.
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.
The arbitration format makes it harder for the average consumer to make a claim since claimants must pay arbitration fees and additional costs, such as traveling to Hong Kong.
