An international group of investors from Italy brought a class action lawsuit against Binance to seek damages for their losses during several exchange outages in 2021. Binance, a global cryptocurrency exchange, will appear before an Italian court Thursday to face a class action lawsuit brought by investors seeking damages for losses incurred during platform outages last year.
In November 2021, Binance users from Italy and abroad filed a lawsuit against Changpeng Zhao and the CEO. They cited multiple incidents in which the platform was offline and users were locked out of the exchange. Investors claim that the outages prevented them from changing their trading positions, leading to “tens to millions” in losses.
When trading volumes rise, Binance isn’t the only cryptocurrency exchange that goes offline. Trades flock to crypto exchanges when there is big news. In the past, exchanges have tended to buckle in response to this pressure. Investors cite one incident that occurred in February 2021.
Other crypto exchanges were also affected by outages
Multiple high-profile crypto trading platforms such as Binance, Kraken, and Gemini were affected by increased trading loads after news that Elon Musk had invested $1.5 Billion in bitcoin.
Binance is also accused of violating Italy’s financial regulations by allowing users to trade leveraged futures through the platform. Futures are agreements that allow you to trade an asset at a fixed price and time in future.
Legal action was already underway after Italy’s financial regulator told last July that Binance was not allowed to offer investment services in the country. Binance was authorized to register on a list maintained by the Italian regulator. Registration does not mean compliance with local regulations. It is only a prelude to submitting firms to anti-money laundering standards.
Italian investors look for help from Swiss blockchain consortium
According to Michele Ficara Manganelli (director of the consortium), a group made up of Italian Binance users approached Swiss Blockchain Consortium last year for help in recovering losses from outages.
Manganelli wrote to CoinDesk, “Being Italian-speaking” and “having a more advanced Italian market than the Italian one means that we are one the main points for reference for Italian investors.” Lexia Avvocati, a Milan-based law firm, was called to represent investors.
Francesco Dagnino (managing partner at Lexia Avvocati) stated that although Binance offered to compensate investors who were affected, the amount of compensation proposed was “negligible”.
“We were told by some investors, that even those who accepted were not refunded,” Dagnino stated during a CoinDesk interview. He was referring to Binance’s offer to users to cover losses resulting from the outages.
Dagnino stated that Binance also offered futures trading to Italian clients without regulatory approval or compliance with local laws. Dagnino stated that it is clear that when you sell a future, particularly with that kind of leverage, it doesn’t matter what the asset underneath it is. It’s always a derivative product and always a financial products.
Dagnino stated that the next step will be for the court’s decision on accepting the class-action lawsuit. Investors can then begin to join the suit. Dagnino stated that at least 100 investors are involved in the case. However, more will join. Mandanelli said that investors in Binance from Italy and Europe will be able to file a suit for damages.
Binance has not participated
Binance has not yet participated in the proceeding. This means that it has not filed any defense statements before the deadline of 10 days before hearing.
Dagnino states that it is not compulsory to file any statements. He is uncertain if Binance will attend the hearing but believes it will due to the recent efforts of the company to register an Italian office and to be included in the virtual asset service provider list.
“[Binance] made significant announcements about their interest the Italian market, and the Italian people. So, I don’t know. I would assume that they are trying to clarify these issues. “But we will see,” Dagnino stated.
Binance will not be present at the Court of Milan on September 15th. A judge will rule on the case without Binance present. The company will also lose its right to make statements of defense.