After crypto investors lost $600 billion in just 30 minutes last Friday, including 1.7 million wallets suffering forced liquidations, some victims are looking to sue centralized exchanges (CEXs).
Tens of thousands joined social audio spaces to discuss available remedies, with one group chat claiming its members lost over $100 million in total.
Amid the ongoing fallout from the spectacular collapse of October 10, sophisticated victims with commercial litigation experience are privately convening.
Eyeing any potential for illegal conduct or breach of contract at centralized exchanges, litigants are looking for lead plaintiffs with “material losses” across the globe.
Unless one plaintiff has enough personal losses to justify expensive attorney’s fees, victims of a corporate crime often link together in a class action. More efficient for the court system and with lower fees per person for legal representation, civil class actions are a tool for individuals to gain strength in numbers to fight the world’s most powerful companies.
Arthur Cheong, founder of Defiance Capital, has experience with commercial litigation and gained over 60,000 impressions for his invitation to join potential class actions.
“Seen Arthur defend his investor’s rights before,” said Ray Hindi, Managing Partner at L1D. “He has painful but deep experience on the matter.”
Focusing on Binance’s conduct on October 10
Needless to say, Binance could become a target for potential litigation. The exchange posted some of the lowest prices during the crash, including 99.9% loss anomalies during the flash crash that were far lower than any other exchange.
Moreover, any litigation against Binance has the benefit of its large size, ability to pay a settlement, plentiful customers who could join a class action, and three corporate payouts that could be evaluated as potential evidence.
Although the payments weren’t necessarily acknowledgements of wrongdoing — indeed, the exchange has highlighted that these funds don’t imply any “liability for users’ losses” — Binance did pay incredible sums of money to customers that suffered losses on October 10.
Read more: How Binance’s USDe ‘depeg’ cost the exchange millions
First, Binance paid $283 million to “Futures, Margin, and Loan users who held USDE, BNSOL, and WBETH as collateral and were impacted by the depeg” during the crash.
Then, the company committed $100 million in low-interest loans plus $300 million in Rewards Hub vouchers “to eligible users who lost at least $50 during a forced liquidation on Binance during the pullback.”
Finally, Binance paid another $45 million to BNB memecoin investors who lost money.
Hundreds of millions might not be enough
Although the payments are helpful, they might not be enough. Wintermute CEO, Evgeny Gaevoy, noted that institutional customers are still evaluating their legal options.
He said Wintermute was Auto-DeLeveraged or ADL’d at prices, including on Binance and elsewhere, that were “very strange.”
“Sometimes we get ADL’d at a completely ridiculous price. It just didn’t make any sense,” he complained in reference to October 10 while disclosing that he was evaluating his legal options.
Protos reached out to Cheong for comment but didn’t receive an immediate response prior to publication.
