Cryptocurrency exchanges have recently been in the spotlight due to outages and bad customer service. The increased number of people getting involved with crypto assets has pushed exchange servers to the limit. Coinbase, Kucoin, and Binance have had an incredible number of complaints filed by users for lack of access to its platforms.
Back in May, there was a major news release stating China would ban cryptocurrencies completely. Despite the news circulating for years, the market took a big dive from the announcement. Ethereum and Bitcoin dropped 30% in just a few hours as many feared the bull market was now over.
On 19 May during the biggest movement of the market, some of the largest exchanges, including Binance, had a major outage that lasted 30 minutes. Crypto holders could not access accounts or open trades during the time. The result of this outage cost its users millions of dollars who are now looking to file a lawsuit.
The main issue was related to leveraged trading. With leveraged trading, one can magnify gains or losses on a trade. Without leveraged trading, the loss experienced during a downturn like this is equal to the amounts that crypto-assets dropped – investments can plummet to zero.
A Canadian crypto trader has reported a loss of $9m as they frantically tried to close their trade to no avail.
There are a lot of people who use trading bots when dealing with volatile markets. These bots use the exchange’s API to buy and sell coins depending on their price movement.
The Binance outage on 19 May resulted in API servers going down and many trading bots failing to sell when the market dropped. One user reported that the outage cost them $80,000 as their algorithmic trading bot failed.
After the outage, Binance tweeted saying it would compensate those who had suffered a loss. The tweet was subsequently deleted and those who had already signed up were forced to sign non-disclosure agreements and a contract releasing Binance of any responsibility and waiving the right to sue the platform.
A Swiss legal financial group Liti Capital has raised $5m to sue Binance on behalf of those who lost money.
Crypto enthusiasts on Twitter have joked that if this lawsuit is successful, it might be safer to keep funds with Binance after all.