Together, they hope to first get an international arbitrator to decide that Binance's contract terms are "unconscionable," a legal concept recognized in the case law of most developed countries, including Hong Kong's " unconscionability doctrine," and therefore unenforceable. Kay, through his startup Liti Capital, has provided $5 million in financing to bring the claim before Hong Kong's international arbitrators, drawing on Lejniece's expertise in litigation and cross-border disputes, the pair announced Thursday. However, they now have a secret weapon: the backing of Lejniece and litigation finance strategist David Kay. The two clauses mean that if all 700 traders wanted to act individually, they would, under the terms of service, have to pay more than $45 million in international arbitration fees for the chance to win a tiny fraction of that sum back. The only way users can resolve disputes, according to the terms of use, is through arbitration in Hong Kong's International Arbitration Center, where the cost of having a case heard is $65,000 - prohibitively expensive for the average amateur crypto trader.Ī second catch buried in Binance's terms of use is the stipulation that damages are capped at 12 months' worth of trading fees - a fraction of a percentage of the value of trades made on the exchange. It also requires users who sign up to agree to terms of use that waive their rights to class-action lawsuits.
Binance has attracted scrutiny from financial watchdogs around the globe over allegations that it skirted regulation for years by shifting its operations to different jurisdictions and claiming to have no headquarters, although it has been domiciled in several countries. In any case, users can always approach our customer support team if they require assistance." The path to compensationīut the path to potential compensation won't be easy. In response to allegations that users like Martin have had their accounts frozen, Kim said: "Unless there are outstanding account security or compliance matters, users can always move or withdraw their funds. He said the "exponential growth of cryptocurrency can occasionally pose technical bottlenecks for exchange platforms due to real-time market fluctuations associated with periods of high trading volume." "Binance is basically operating like a financial institution but is not encumbered by any of the regulations such an institution would typically have to comply with."īinance spokesman Riley Kim declined to comment on the pending arbitration. "It's going to be a historic case, and it's definitely going to attract a lot of regulators' attention," said Aija Lejniece, an international arbitration lawyer based in Paris who is advising the complainants. Martin is one of about 700 crypto traders from dozens of countries who have come together online to explore how they can take action against Binance after they either lost access to their accounts without clear explanation or recourse or they lost money when the exchange crashed on May 19, leaving them unable to move their funds despite their frantic efforts as the prices of cryptocurrencies tumbled.Īfter months of organizing and consulting with legal experts, the group has settled on the unusual strategy, announced Thursday, to pursue international arbitration, a form of cross-border dispute resolution typically used by multinational companies, to hold a largely unregulated, borderless company with no headquarters to account. "Where are they putting everybody's money?" Sable Martin at her home in Douglasville, Ga.
"You can't get in contact with anybody," she said.
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