Good luck suing crypto exchanges, market makers over the flash crash
If a crypto exchange has tech glitches, or a market maker pulls liquidity, exacerbating a flash crash, there are few legal avenues to pursue.
Almost twenty billion dollars in perpetual futures positions were liquidated during the Oct. 10 crypto crash, prompting traders to ask who should pay if platforms fail under pressure.
Unlike regulated securities exchanges, crypto venues can pull liquidity, cut profitable positions and often rely on arbitration clauses that limit legal recourse as long as users have clicked I agree.
In the latest liquidation frenzy, Binance was at the center of controversy as some users claimed they were unable to properly close their positions in time. Binance said its core features remained operational, but acknowledged technical glitches that caused certain asset prices to appear temporarily depegged from the broader market.
Earlier this weeks social media was rife with rumors that market maker Wintermute planned to sue Binance over losses sustained during the crash, although that was quickly denied by CEO Evgeny Gaevoy.