Binance, maxi-cause risk from Italy

Trouble ahead for Binance which risks facing a lawsuit to compensate a group of Italian and international investors. 

The Lexia Avvocati di Milano firm , in collaboration with the Swiss Blockchain Consortium , has in fact received the task of obtaining compensation for the amounts invested and for the damages suffered by a group of traders who traded on futures and who have found themselves repeatedly unable to access the Binance platform in conjunction with moments of high market volatility.

In the letter addressed to various Binance offices that report as many company names, as well as to CEO Changpeng Zhao, the reasons that risk leading to legal action are reconstructed.

To sign it are the lawyers Francesco Dagnino, Angelo Messore and Michele Mennoia. 

The reasons for the lawsuit against Binance

The troubles for the damaged group of traders start on February 8, 2021. It was the day Elon Musk announced that Tesla had invested in Bitcoin . That tweet was followed by appalling (upward) market volatility. But traders who have now turned to lawyers were unable to log into their Binance account where they had open positions in cryptocurrency futures trading. Result: their positions were liquidated because they were unable to intervene to adjust the settings based on the current market movement.

On February 23, Binance publicly admitted that there had been some misunderstandings on the platform, inviting those who had stumbled upon the malfunction to open a report at a specific address.

But, the lawyers say, once the complaint was opened, the victims received a decidedly contained compensation proposal in response :

“In response to these requests, Binance offered a paltry amount to compensate for the losses suffered by customers, who had no choice but to reject such laughable proposals,”

This is what the lawyers write in the note sent to Binance.

Furthermore, they add, the episode of February 8 did not remain isolated. Other blockages on the platform occurred on May 19, coinciding with the turbulence following China’s ban on mining activities, but also on other days identified as follows:

  • April 18, 2021,
  • May 5, 2021,
  • May 28, 2021,
  • June 4, 2021.

This leads lawyers to argue that:

Customers are aware that Binance has not taken any corrective action to date to fix the functioning of the system.

The same concept is also reiterated in other parts of the letter, which in fact summarizes what happened: traders were damaged because the platform was inaccessible, the episodes were repeated several times, and Binance was unable to adequately compensate the victims of the malfunctions.

To this technical aspect, however, there is also another regulatory aspect. In fact, the lawyers write:

“It appears that Binance has offered trading services in financial instruments – such as Futures – without being authorized in Europe to operate as an investment firm in accordance with the framework established by Directive 2014/65 / EU (the” MiFID 2 “) and that no equivalent license has been granted to Binance to perform such services in other non-EU jurisdictions, such as, for example, Switzerland “

Precisely this aspect complicates the situation as investors would have been deprived of the protections guaranteed by the law to guarantee those who do trading activities.

Finally, there would be no real contract between Binance and the traders who access its services.

For all these reasons, the law firm asks the platform to be contacted by July 12, 2021, to quantify the damages to which investors have been exposed.

If this does not happen, the law firm will not only initiate lawsuits, but will take charge of reporting the situation to the European and Swiss authorities asking them to intervene against Binance, even going so far as to expect that the site is blacked out both in Europe and in Switzerland. . 

Among the consequences is also assumed the request to freeze Binance funds to protect the interests of customers.

Finally, the text concludes by adding that there are other people who are ready to take legal action because of the losses suffered.

This action is configured as a real class action , so much so that there is also a form where other investors who feel damaged by Binance can get in touch with Lexia and evaluate their position.

The troubles of Binance

It looks like a tough time for Binance from a legal standpoint. In fact, the Italian affair risks complicating the position of the exchange if it were truly established that there are no authorizations to operate as a trading platform in Europe.

This situation adds to what has already happened in the Cayman Islands, where local authorities have already made it known that they have not issued any authorizations to Binance. Even in the UK FCA intervened to clarify that Binance Markets Limited (and not Binance in full) is not authorized to operate.

In short, there are several jurisdictions that are lighting a beacon on Binance’s operations. This will have to lead the exchange headed by Changpeng Zhao to have to interact with the authorities to avoid worse consequences.

There are currently no official comments from Binance on the matter. But a recent tweet devoted to the ongoing disputes in the UK reads as follows:

“We take our compliance obligations very seriously, and are committed to working collaboratively with regulators to shape policies that protect consumers, encourage innovation and advance the industry.”

Now all that remains is to wait until July 12 to see if Binance will respond to the law firm by offering adequate compensation to the traders assisted by Lexia. Otherwise, a cause is looming that can seriously jeopardize the operation of the largest cryptocurrency exchange in the world.


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