[Bitcoin Now] Plunge Hits While Binance Is Unresponsive... Investors Even Considering Lawsuits

Low Compensation Probability... Binance with Unclear Headquarters Location
US Fed Mentions Cryptocurrency for the First Time in Official Report

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Gong Byung-sun] Investors who suffered losses when the overseas cryptocurrency exchange Binance went down during the Bitcoin price crash are preparing for a lawsuit. Although investors have hired professional lawyers and announced legal action, compensation is expected to be difficult due to the unclear location of Binance.

On the 11th (local time), the U.S. Wall Street Journal (WSJ) reported that about 700 investors worldwide are contacting lawyers to demand compensation from Binance. According to WSJ, when Bitcoin plunged sharply on May 19, the Binance application (app) was down for an hour. At that time, Bitcoin dropped more than 10 million KRW in a single day. In particular, since Binance allows futures trading with up to 125x leverage, even a slight drop in price can trigger forced liquidation, increasing the amount of damage. For example, with a margin of 1 million KRW and 125x leverage, a 0.8% rise would multiply by 125 to yield a profit of 1 million KRW. Conversely, a 0.8% drop would result in losing the entire 1 million KRW margin.

However, the probability of investors receiving compensation appears low. WSJ pointed out that it is difficult to hold Binance accountable due to the unclear location of its headquarters. Last year, reports emerged that Binance had established an operations team in Malta, a Mediterranean island nation, suggesting a headquarters location. However, Josh Goodbody, Binance’s Head of Business, refuted this, stating, “Binance operates in a decentralized manner, so the headquarters location is unclear.” Additionally, Binance guides dispute resolution procedures through the Hong Kong International Arbitration Centre, but it is known that the process requires significant time and cost for ordinary investors.

Meanwhile, the U.S. Federal Reserve (Fed) mentioned cryptocurrency for the first time in an official report. According to Bloomberg, a U.S. economic media outlet, on the 10th, the Fed explained in its semiannual financial policy report that “the rise in cryptocurrency reflects some investors’ preference for risk assets.” Bloomberg argued that the Fed’s mention of the cryptocurrency market is evidence of increased attention.

According to the domestic cryptocurrency exchange Upbit, as of 3:22 p.m. on the 12th, Bitcoin recorded 40.16 million KRW, down 0.06% compared to the previous day. Since the beginning of this month, Bitcoin prices have been fluctuating around 40 million KRW.