Anand Singhal built up $50,000 in savings from the time he was 13 doing freelance coding from his bedroom in New Delhi. It was meant to pay for a master’s degree in computer science in the U.S. The money disappeared in seven minutes on May 19.
Binance, the world’s largest cryptocurrency exchange, froze for over an hour just as the price of bitcoin and other cryptocurrencies plunged. Mr. Singhal and others, who had made leveraged bets on their rise, were locked out.
As losses steepened, the exchange seized their margin collateral and liquidated their holdings. Mr. Singhal said he lost his $50,000 plus $24,000 he had made in previous trades.
Binance traders around the world have been trying to get their money back. But unlike a more traditional investment platform, Binance is largely unregulated and has no headquarters, making it difficult, the traders say, to figure out whom to petition.
Mr. Singhal has joined a group of about 700 traders who are working with a lawyer in France to recoup their losses. In Italy, another group is petitioning Binance over the same issue. Lawyers representing the Italy group sent a letter to 11 Binance addresses they could find in Europe, and an email to the help desk.
A Binance spokesman said extreme market volatility, like on May 19, can create technical bottlenecks for it and other exchanges.
Binance Froze When Bitcoin Crashed. Now Users Want Their Money Back.
The world’s largest crypto exchange has no headquarters, making it difficult for disgruntled traders to complain about the May crash.
Anand Singhal built up $50,000 in savings from the time he was 13 doing freelance coding from his bedroom in New Delhi. It was meant to pay for a dream—a master’s degree in computer science in the U.S. The money disappeared in seven minutes on May 19.
Binance, the world’s largest cryptocurrency exchange, froze for over an hour just as the price of bitcoin and other cryptocurrencies plunged. Mr. Singhal and others, who had made leveraged bets on their rise, were locked out.
As losses steepened, the exchange seized their margin collateral and liquidated their holdings. Mr. Singhal said he lost his $50,000 plus $24,000 he had made in previous trades.
Binance traders around the world have been trying to get their money back. But unlike a more traditional investment platform, Binance is largely unregulated and has no headquarters, making it difficult, the traders say, to figure out whom to petition.
Mr. Singhal has joined a group of about 700 traders who are working with a lawyer in France to recoup their losses. In Italy, another group is petitioning Binance over the same issue. Lawyers representing the Italy group sent a letter to 11 Binance addresses they could find in Europe, and an email to the help desk.
A Binance spokesman said extreme market volatility, like on May 19, can create technical bottlenecks for it and other exchanges.
“We took immediate steps to engage with users affected by the outage,” and to provide compensation, the spokesman said. He added that “we remain happy to speak to anyone who reaches out to us with a concern about the outage.”
In an open letter published July 7, Binance founder Changpeng Zhao said the exchange was committed to being compliant with appropriate local rules. But he has dismissed the idea of having a headquarters, saying it is an antiquated concept.
The price of bitcoin and other digital assets soared earlier this year, sparking a world-wide frenzy in trading. A huge chunk of that business flowed through Binance, which handled nearly $2.5 trillion in derivatives trades in May, according to data provider CryptoCompare. The subsequent crash in prices exposed the exchange’s inability at times to handle massive trading volume and has led to a backlash from users.
Authorities in Japan and the Cayman Islands have said Binance doesn’t have licenses to operate in those jurisdictions. The U.K. said Binance’s local unit wasn’t permitted to conduct operations related to regulated financial activities. Several British banks have stopped customers from transferring money to Binance.
In the U.S., Binance doesn’t direct users to its main website. Instead, it has an affiliate, called Binance.US, which offers spot trading of cryptocurrencies. Because Binance.US doesn’t offer derivatives, it doesn’t need to be registered with the Commodity Futures Trading Commission.
Mr. Zhao, 44, founded Binance in China. The Canadian-Chinese programmer got into bitcoin trading after hearing about it at a poker game, according to a 2020 interview posted online. Forbes has valued his fortune at $1.9 billion.
He set up Binance to help investors buy and sell cryptocurrencies and later offered more complex financial products, including futures—a contract that allows traders to buy or sell a specific cryptocurrency in the future.
To make returns more attractive, traders on its main website can make oversize bets with little money. Investors can get leverage of 125 to 1 for some futures contracts, meaning they can deposit just 80 cents to amass the equivalent of $100 of bitcoin or another currency.
