Binance crashed in mid-May at a time when cryptos were plunging, denying traders the chance to exit positions and leading to millions of dollars in losses.
Several traders have banded together and are now going after the exchange for the losses, adding on to the raft of troubles facing the exchange.
In mid-May, Binance crashed. At the time, the crash didn’t get as much attention as the cryptocurrency market was in a buzz of activities, with most cryptos plunging at the time. However, for thousands of traders, their lives changed on that day after they were unable to exit their positions on Binance. Now, these traders are uniting to go after the exchange for the losses.
One of the traders who lost it all is Anand Singhal, an Indian programmer. He had saved up $50,000 over 13 years doing freelance work, money which he hoped would go towards financing his master’s degree in computer science in the U.S. He, however, took to crypto trading, and made a fortune of it. Until May 19, a day which in his own words, “left him traumatized.”
Singhal had made a leveraged bet on Bitcoin on Binance. This is when an exchange lets you make an oversized bet with way more money that is on your account. On Binance, the leverage goes as high as 125 to 1 – this means that for every $1 a trader has, he can purchase as much as $125 worth of crypto.
Attractive as it seems, it’s also extremely risky. Should your bet not pay off, your losses are magnified by as big a margin, and the exchange quickly liquidates your holdings.
This is what happened to Singhal, but through no fault of his own. When BTC started sliding, he attempted to sell his stash, but Binance had frozen. The losses piled on and the exchange automatically liquidated his entire Bitcoin stash, losing him the $50,000 and $24,000 he had made through trading.
‘Binance has traumatized me, I’ll never trade again’
Singhal is not an isolated case. In fact, the number of traders who lost fortunes on that fateful day is high enough that they have banded together to pursue justice against the exchange. According to a Wall Street Journal report, these disgruntled traders have a Discord group where they trade notes and strategies.
The group even has a lawyer advising it, and according to her, the unity from the traders will ensure their voices are heard. Aija Lejniece, who until recently worked at Parisian law firm Latham & Watkins, told WSJ:
Binance has made it difficult—not impossible, but difficult—for the average consumer to seek recourse… by banding together the group can get full compensation for the traders’ losses.
One of the challenges of going after Binance is its ever-elusive headquarters. The traders claim that they have been unable to nail down where exactly the exchange is based and how to go after it.
Binance has also been attempting to silence the traders. According to Singhal, when he filed a compensation claim form, the exchange – instead of offering compensation – offered him a three-month upgrade to its VIP platform. In return, he had to “release and forever discharge the exchange from any action over his losses.” If he made the offer public, Binance allegedly threatened to withdraw it.
I will never trade again. I feel cheated.
Binance is not alone. Robinhood has been in these murky waters for some time now. However, unlike Binance, Robinhood is clearly regulated and it was made to atone for its ills recently via a $12 million fine.
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