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The plaintiffs are grouped in arbitration for decentralization

When does decentralization stop being an experiment in technological democracy and begin to be a way to avoid responsibility?

That is the question that is at the center of a possible $ 100 million arbitration lawsuit against crypto exchange Binance, in which about 1,000 traders ask for compensation for the losses suffered during the site crash on May 19.

Binance experienced technical issues for several hours on May 19 amid one of the worst market dips of the year as the global cryptocurrency market took a 33% drop. Traders were unable to trade while Binance was unavailable, with many finding their accounts empty when the site came back online.

Binance’s terms of use exempt you from any liability for losses incurred by new users when registering with the exchange. The company has no official headquarters and is not registered or regulated in any jurisdiction.

Hundreds of users have joined the case since it was announced on August 19, he said David Kay, of Liti Capital, who leads the steering and advisory committee that directs the arbitration on behalf of the claimants.

Of the more than 700 original plaintiffs, only six claim damages in excess of $ 20 million. But Kay believes that the total amount lost by traders during the May 19 crash could exceed USD 100 million.

A cloak of decentralization?

Speaking to Cointelegraph, Kay said that Binance had self-applied the label of “decentralized” to great effect during its time as the world’s largest cryptocurrency exchange, but only to further its goals. Said:

“Binance tries to camouflage itself as a community asset, which it is not. It is a corporation that uses community assets. […] He has done a good job of blurring the lines, and getting wrapped up in the idea of ​​decentralization. “

Kay suggested that Binance used the notion of decentralization to sculpt dividing lines through the cryptocurrency community fostering an “inside group / outside group” mentality, stating: “Binance will point out the fact that it is headquartered, the fact that it is unregulated, and say, ‘If you are against us, you are against that. [la descentralización]'”.

The founder and CEO of Binance, Changpeng Zhao, has rejected the idea that the exchange needs an official headquarters, noting that Bitcoin (BTC) itself does not have a base of operations. Addressing an audience at the 2020 Ethereal Summit, Zhao said that Binance’s office was where he and his team happened to operate at the time:

“Where is the Bitcoin office? Bitcoin has no office. […] Wherever I sit is going to be the Binance office. Wherever you need someone, it will be the Binance office. “

Binance processes $ 25 billion worth of cryptocurrencies on a daily basis and has seen more than $ 2 trillion pass through its exchange to date. Its margin trading platform allows users to leverage trades up to 125 times their original holdings, a practice that has been banned by regulators in the United States and the United Kingdom.

In November 2020, Coinbase disabled margin trading on its professional trading platform following official guidance from the US Commodity Futures Trading Commission. But Binance, along with numerous other unregulated crypto exchanges, continued to offer high-risk trading products.

The happy tramp

Traders who suffered improper losses using Binance systems have had few options to initiate, let alone resolve, legal action against the company. As the exchange jumped out of China, Japan, and Malta in recent years (to nowhere), its clients had no recognized scenario on which to base a legal case.

Binance has since added a stipulation to its terms and conditions in which it states that it will agree to address claims made against it in the Hong Kong International Arbitration Center. The HKIAC is very expensive for individuals to file small lawsuits, with each case incurring a fee of USD 65,000 simply to initiate the procedure. Furthermore, claims can only be made on an individual basis, which excludes the possibility of class action lawsuits.

The prohibitive cost of going to arbitration court causes most users to refrain from filing a claim against the exchange. One of the plaintiffs, who only wishes to be known as Jean-Jacques, lost more than $ 10,000 the day Binance went down, an amount that he would be forced to pay many times over to use the Hong Kong court as an arbitrator.

Other people lost funds ranging from $ 100 million to $ 12 million on May 19, and on other dates before and after. Kate Marie, health consultant and author from Sydney (Australia), he lost between $ 160,000 and $ 250,000 by not being able to access his futures trading account during the site outage. Marie said:

“I could not properly manage my futures account and they liquidated me quickly, and without prior notice, my margin status had changed. The same happened on the 23rd, even though I had security measures. This was going to mark my life.” .

Toronto (Canada) retail traders lost 3,300 Ether (ETH) (valued at about $ 6 million at the time) because the site’s user interface froze and prevented them from closing their position. Ahmed described experiencing symptoms of severe depression after the fall.

No witch hunt

Kay stressed that the arbitration against Binance is not a witch hunt. He acknowledges the usefulness that such a platform can bring to the cryptocurrency space, but believes that a line needs to be drawn in the sand.

“We are not anti-Binance. We are for Binance. Binance can continue to be good for the community. It is about the fact that we all make mistakes, but ultimately those mistakes have to be rectified. We do not want to destroy Binance, but this has to be cleaned “, Kay said.

Liti Capital, the group that Kay leads, he is bearing the costs of the arbitration and will be compensated with a part of the damages awarded in the event that the procedure is judged in favor of the claimants.

The plaintiffs are seeking to challenge the applicability of Binance’s terms of use for clicks, which according to Kay do not constitute a negotiated contract. The group will also try to challenge the idea that claims can only be made individually at CAI Hong Kong, but Kay said they are also prepared to fight each claim one by one if necessary.

“We won’t stop if we have to sue them individually,” said.

User disagreement

Carol Goforth, Professor of Law at the University of Arkansas, It said click-through terms of use are common in the e-commerce world and could be part of a legally binding contract, assuming the terms are reasonable. Goforth told Cointelegraph:

“If the terms are reasonably conspicuous and you really have to click through a link that warns you that you are accepting the terms of the site, they can be part of the contract.”

According to Goforth, the user agreement could be annulled if the plaintiffs show that the conditions are disproportionate. This means that they would have to prove that the contract was unfair or abusive during its formation.

Binance had little to say about the prospect of arbitrage at the time of writing. A spokesperson told Cointelegraph: “We are committed to the legal process to resolve disputes and do not comment on pending legal issues.”

The exchange was the target of heavy regulatory and legal scrutiny during the summer of 2021, as authorities in the United States, United Kingdom, France, India, Japan, the Cayman Islands and more sought to ban its products from trading or go after the exchange and its affiliates for violating national law. Since then, Binance has shut down some of its leveraged trading products and has stopped offering its services to clients in certain jurisdictions.

Claimants who lend themselves to arbitration say they do so for a wide number of reasons. PFor some, including Kay, it’s about removing the false cloak of decentralization that Binance has used to disguise itself for so long.

“Imagine if Amazon said: ‘Sorry, our workers and customers can never sue us, because we are part of the Internet, and the Internet must remain deregulated'”, Kay stated. “That does not work”.

Keep reading:

Tammy Sewell is our Writer and Social at OICanadian.com. Tammy loves sports, she writes our celebrities news. She spends time browsing through several celebs news sources as well the Instagram. Email: [email protected] Phone: +1 513-209-1700

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