In the week when a record number of trades made by Italian users on Binance surpassed its French cousins, from a group of largely Italian investors comes a bitter-tasting lawsuit for the exchange.
Binance sued by a group of Italians
In reality, the lawsuit had already begun last year, when under market pressure Binance encountered service problems as it failed to process the huge volume of transactions at one point and blocked operations several times.
According to the investors who filed the lawsuit, this service interruption generated economic damage for a number of reasons.
The failure to sell or buy generated losses and the failure to take advantage of important opportunities that would have been a source of gains for savvy investors.
This is how a group of investors, mostly Italians (but also some foreigners) filed a lawsuit against the CZ giant that will force the company to appear in court on 15 September 2022 at the Milan court criminal section.
The Hub has chosen not to file any defense briefs within the ten-day deadline, so the judge will be able to rule even without the company’s presence in the courtroom.
Founded in 2017 by Changpeng Zhao (who also serves as its CEO), Binance is a company that operates the cryptocurrency exchange platform of the same name. However, sometimes success has its downsides, such as running into mishaps that can sometimes generate multimillion-dollar lawsuits.
The company made this known through the voice of its lawyer:
“[Binance] made important announcements about their interest in the Italian market and the Italian people. So I don’t know. … I expect them to want to clarify these issues. But we’ll see.”
The subject of contention is not just service disruption or lost earnings, the company is also under attack for its alleged lack of authorization to operate in Italy (to which the exchange has basically responded that it does not care since it is an international organization and not limited to one area) and the fact that it has allowed leveraged trading in futures.
Futures are trading agreements to sell an asset at a pre-determined price and time in the future, the fact that they allowed leveraged trading on the platform should not be legal according to the firm that filed the million-dollar lawsuit.
In this regard, managing partner Francesco Dagnino of Lexia Avvocati (the law firm to which the plaintiff refers) said:
“It is absolutely clear that when you sell a future, especially with that type of leverage, no matter what the underlying asset is, it is always a derivative and always a financial product.”
Binance had said it was ready to intervene by compensating those who made claims among those who filed the lawsuit, but this outstretched hand does not seem to have had much appeal from the group of people who initiated the lawsuit.
Dagnino, when questioned by CoinDesk on the matter, referring to Binance‘s offer of compensation toward self-styled users harmed by the 2021 operating blocks, said
“We have been told by some investors that even those who accepted have not been repaid.”
In addition, the amounts the company allegedly gave out to those who applied, according to the law firm, were largely insufficient to cover the damage caused to investors.
Trading volumes are at the root of the problems related to last year’s outages. What happens is that when big enough news or any external intervention or statement causes cryptocurrency prices to rise, traders flock to the exchanges and usually exchanges have tended to crash under the pressure generated by the sheer volume of transactions being processed at the same time.
Trading platforms under the crosshairs of lawsuits
This is not the first time this has happened, a glaring example is the one that dates back to February 2021, at that time the facts did not only affect CZ’s company, different cryptocurrency trading platforms that were very important in terms of volume such as Kraken and Gemini experienced technical problems due to increased trading loads when the breaking news came out that Elon Musk’s Tesla had invested 1.5 billion US dollars in Bitcoin giving a clear vision of how much the tycoon’s company believed in the asset.
The truth is coming in, the firm of Lexia Avvocati and the firm standing in defense of Binance have crossed swords in what appears to be one of those lawsuits that will make law for several reasons.
One of the main reasons seems to be the fact that, as the crypto world is relatively young, these lawsuits lack a large repertoire to draw on in order to get an idea, creating important material for any similar situations that might arise in the future and also, because the size of the eventual settlements, places important goalposts on the attention of the trading platforms that will think twice before running into mishaps like these, perhaps strengthening their computational capacity with targeted investments.
In the meantime, Binance is enjoying the successes of the volumes it has achieved and its growth that knows no rest despite a bear market that does not help and the macroeconomic environment that is no less.
Skyrocketing inflation, high energy prices and difficulties in finding raw materials, and uncertainty caused by the war in Ukraine are all big question marks that could slow the growth of the crypto world but despite this, growth has continued to the delight of Binance.