Can you sue a cryptocurrency exchange?
Investments by global traders and mainstream corporations in cryptocurrencies have fueled acceptance over the past decade. The surge in investment and regulation fronts arises question that , “can you sue a cryptocurrency exchange?” The rapid rise in the number of cryptocurrencies has made it possible for investors to trade crypto assets. Besides 2021 showing cryptocurrency volatility, investment has peaked at the highest this year.
With higher investments, many cryptocurrency exchanges have surfaced in the market. We have seen in recent times governments forced to form laws, enforcements, and litigation to counter fraudulent practices.
The general answer for suing cryptocurrency exchanges is yes. The article covers all the requirements in detail to help you understand the process, subsequently helping you get a positive outcome.
Perquisites of suing a crypto exchange
Law suiting is a complex procedure; you may end up losing not only your initial claim but also lawyer fees. So, before making a move for a suing cryptocurrency exchange, first, you should determine the proper claims.
Equally important is to identify the jurisdiction where to sue the exchange. Furthermore, it is important to understand the basic difference between a centralized and decentralized exchange to determine these enquiries.
The nature of cryptocurrency exchange determines the sue path.
Differentiating Centralized and Decentralized Crypto Exchange
Centralized exchanges are private corporations which offer services for the trade of cryptocurrencies. CEXs act as trusted intermediaries. They act as custodians of your digital assets. Centralized exchanges are numerous, and popular CEXs are Coinbase, Kraken, and Gemini. Centralized crypto exchanges are governed by local laws and regulations in the country of their origin.
Contrarily, decentralized exchanges help peer-to-peer trade. They do not act as custodians or store your crypto for cash. DCEXs do not have a central point of control but work across a network of computers. Because of the nature of operations, DCEXs are not subject to rules and regulations since no specific entity runs the system.
Does the difference wipe a few queries about how can you sue a cryptocurrency exchange?
How to sue a cryptocurrency exchange?
Moving forward with our quest to know how you can sue a cryptocurrency exchange, let’s now understand how one can sue. We will discuss both CEX and DCEX separately.
Suing Centralized Cryptocurrency Exchange
Centralized crypto exchanges can sue in court like any other typical business entity. All applicable rules and regulations come into effect in the case. Remarkably, the terms and conditions of the trade function the lawsuit.
For instance, a lawsuit filed against Coinbase, at the court of justice, for misleading investors about the correct financial health of the cryptocurrency. Yet another class action came out against Coinbase for breaching fiduciary duty for not being able to protect digital assets from hacking.
Suing Decentralized Cryptocurrency Exchange
Filing a lawsuit against a decentralized crypto exchange is a real challenge. Since DCEXs do not have any centralized control point, it becomes difficult to know which rules and regulations will come into effect.
Most recently, Binance was sued by a group of investors for allegedly causing damages by an unannounced outage. However, Binance has no physical presence, so the question arises of which country’s rules will apply and which court is to be pursued.
Hence, Hong Kong International Arbitration Center heard the claims per the company’s terms and conditions. Investors are forcing the case to be judged under consumer protection; however, it is unclear will the law will cover the claim.
Steps for suing cryptocurrency exchanges
Before suing, read the terms and conditions of the cryptocurrency exchange or your contract, if available. In addition, always seek professional advice from your attorney. Here is an overview of the process for understanding you can sue a cryptocurrency exchange.
Step 1: Preparation and filing of the lawsuit
Firstly, prepare for the lawsuit, which usually includes the following:
- Download the application form from your local court website.
- Complete the form by providing all necessary information, including your name, address, exchange details, amount, and your bases for calculation.
- Always use the correct and exact legal name. You can find it on the website of your local Secretary of State or the Security and Exchange Commission.
- File the lawsuit. You can file the claim in person, by email, or by fax.
Step 2: Notifying the defendant
Secondly, you must notify the defendant after you get your lawsuit number.
- The critical thing is to note to whom you will serve the notification. Since large cryptocurrency exchanges use an “agent for service of process” facility, thus you will notify the company or be authorized to receive such information.
- Notification must be sent physically by registered mail; however, few states allow such messages in an email or by fax.
- Submit proof of notification with the court, and check whether you need to make any additional filings on the case.
Step 3: Prepare for a hearing.
Thirdly, now have your claim ready for hearing, and have a lawyer to represent you.
- Prepare your statement in consultation with your lawyer.
- Prepare evidence. One of the most important steps is as it will make or break your lawsuit. Physical evidence like screenshots, emails, or pictures makes up good evidence.
Step 4: Pursuing the hearing dates
Lastly, it would be best if you remained in touch with the court. Make sure to reach the court in time and provide all information as and when requested by the court.
Lawsuits against cryptocurrency exchanges have boomed in recent times. As the crypto market is getting popular, so are the issues. We hear daily about people suing crypto exchanges as a single suit or class action.
We have covered all the necessary information to answer the question, can you sue a cryptocurrency exchange?
Firstly, understand the type of exchange, involve your layer, and read the terms and conditions carefully before making a move with the lawsuit. Here’s hoping you do not have to get involved with lawsuits, as it is draining. So good luck with your investments.
Frequently Asked Questions
Yes! You can sue cryptocurrency exchange. But, understand the type of exchange, whether it is centralized or decentralized, and make your lawsuit accordingly.
Yes, you can get your lost money back. However, it depends on the suit; if the court decides in your favor, you will only have your money back. The court also determines how much money you will receive as compensation.
All kinds of misconduct, including fraud, false advertisement, misinformation, negligence of fiduciary duty, scam, and many others.
You can sue cryptocurrency exchange as a class action or a single suit. The purpose of a class suit is to provide benefits to all affected. While a single case is for a single person only.