Famous global cryptocurrency exchange Binance will appear in an Italian court this week to defend itself in a class-action lawsuit that names CEO Changpeng Zhao, according to media reports. Binance was being examined by the Public Prosecutor’s Office at the Court of Milan following a complaint presented by some stakeholders.
The lawsuit was filed in 2021 by a group of Italian and international Binance users seeking damages for losses suffered during platform outages at critical trading times last year.
According to the lawsuit filed in Milan, “the launch of the class action comes at the height of an intense activity carried out by the Firm in the previous months, which has allowed, among other things, to highlight the numerous criticalities of the Binance platform, bringing them to the attention of the Supervisory Authorities of numerous Foreign states and Consob.”
Multiple incidents occurred when the platform went offline and locked users out of the exchange. The investors allegedly suffered “tens of millions” in losses because of the outages as they couldn’t change their trading positions.
A similar incident occurred in February 2021, when multiple high-profile crypto trading platforms like Binance, Kraken, and Gemini experienced technical issues due to increased trading loads over news that Elon Musk’s Tesla had invested $1.5 billion in Bitcoin.
Binance Also Allegedly Violated Italy’s Financial Regulations
The lawsuit also alleges that Binance violated Italy’s regulation when it let Italian users trade leveraged futures on the platform.
In July 2021, Italy’s financial regulator warned that Binance was not authorized to provide investment services in the country. Earlier this year, Binance was approved to register in a regulator-maintained list of crypto service providers in Italy. The registration itself does not imply compliance with local regulations and is only a precursor to subjecting firms to anti-money laundering standards in the country.
Speaking recently at Binance Blockchain Week Paris, Zhao said that the European Union’s landmark Market in Crypto Assets (MiCA) regulation is “a little bit strict” on stablecoins, which are cryptocurrencies pegged to the value of other assets like gold or the U.S. dollar.
On the Flipside
- Binance had offered to compensate affected investors, but the proposed compensation was not considered to be a sufficient amount by stakeholders.
Why You Should Care
Exchange outages have become more common and are a growing concern among investors.