Cryptocurrencies aren't all diamonds and roses — lawsuits from people who lost big are piling up with exchanges
Cryptoexchanges can run into trouble with investors, regular users or even regulators, but the impact may be on many.
- Big exchanges like Binance, Bithumb, and others are facing lawsuits in various countries.
- The US Securities and Exchange Commission’s (SEC) investigation into Ripple could also hurt investors, depending on the outcome.
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In fact, experts have often warned that people shouldn’t put more than 5% of their portfolio into crypto. Some even say that any money that a person puts in cryptocurrencies, they should be prepared to lose altogether — overnight gains can just as quickly become overnight losses.
So, what happens when crypto investments go awry? Here’s a quick look at some examples from around the world.
A class action lawsuit has been filed against the world’ largest crypto exchange for glitching in Italy
A group of investors are suing the world’s largest
The law firm has filed a class action lawsuit against the crypto exchanges because the “anomalies in the functioning of the trading platform” caused certain inventors to lose money on futures. Futures are a type of derivative financial instrument that allows traders to buy or sell a particular cryptocurrency at a predetermined price at a specified time in the future.
The complainants are alleging that the compensation Binance has offered right now is a “pitiful amount” and has given the company till July 12 to come up with an appropriate offer. They also threatened to seek regulatory help from the European Union and in Switzerland.
The lawsuit could put Binance in a tricky situation, because if it accepts the requests from the complainants, it may have to pay out the same amount to all other investors as well. On the other hand, winning a lawsuit like this could also absolve Binance of the need to pay any compensation at all and set a new standard for the overall crypto industry.
South Korea’s largest crypto exchange is being sued for fraud
Subsidiaries of South Korean exchange, Bithumb, are facing allegations of breach of contract in Hong Kong, and their top executives are facing criminal charges of fraud.
This comes after the same investor, whose name was not disclosed by The Korea Times, had already filed a criminal suit in Korea that has been pending for the last nine months.
AdvertisementThe accusation is that Bithumb acted in bad faith when it announced plans to open up an exchange in Thailand. Instead of establishing a crypto exchange, the company only used its announcement to get people to invest the BXA coin — a virtual asset issued by BK Group Chairman Kim Byung-gun, who had once attempted to take over the firm.
When Kim gave up on that plan due to financial reasons, the coin never got listed on Bithumb. “After Bithumb stopped its BXA coin business, its Thai operation became unnecessary, so the company ended its business in Thailand unilaterally, causing serious damage to us,” the Thai partner told The Korea Times.
They are looking for 100 billion won in compensation and another lawsuit may get filed by one of the crypto exchange’s former partners in Japan — where Bithumb also tried to open up a crypto exchange but was unsuccessful.
In the US, Ripple’s fate hangs in the balance
One of the biggest and most consequential lawsuits against crypto companies is the one filed by the US Securities and Exchange Commission (SEC) against Ripple's XRP token.
AdvertisementThe company, which runs one of the largest tokens by market capitalization, has been accused of raising over $1.3 billion through “unregistered, ongoing digital asset securities offerings”, according to the SEC.
While the case is between a financial authority and a large blockchain firm, it's unclear what the outcome will be. Experts have noted that it could affect many investors who have invested in XRP around the world. The token has already been delisted by cryptocurrency exchanges like Bitstamp, OSL, Crosstower and Beaxy.
Phil Liu, the chief legal officer at Arca, told Business Insider the SEC lawsuit is a risk for the XRP token and a more serious one for Ripple. According to him, XRP has “one foot in the grave”. And, that could mean the end of Ripple if it’s unable to raise funds by selling its digital token.
For a more in-depth discussion, come on over to Business Insider Cryptosphere — a forum where users can deep dive into all things crypto, engage in interesting discussions and stay ahead of the curve.
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