Ethereum Traders File Class Action Lawsuit Over Kraken Flash Crash

Jul 5, 2017 at 23:15 UTC
Updated Jul 7, 2017 at 11:11 UTC
NEWS

A class-action lawsuit has been filed against cryptocurrency exchange startup Kraken over issues stemming from its management of a May flash crash.

Less than two months later, five customers of the exchange are alleging negligence, breach of contract and unjust enrichment, arguing that Kraken should have suspended trading amidst a denial-of-service (DDoS) attack that impacted its operations.

Newly filed court documents name five plaintiffs, including one in the US, two in Israel and two others based in the UK, while Payward Inc, which does business as Kraken, is named as the sole defendant. Between the five customers, a total of 3,414.078 ETH – an amount worth roughly $329,000 at a price of $96.32 – was liquidated.

That amount is equal to about $911,000 at press time.

Social media reports at the time attest to a plunge in the price of ether, the cryptocurrency of the ethereum network, on the exchange’s order books, with market data from CryptoCoinCharts.info showcasing how prices touched a low of $26, resulting in a wave of liquidations.

In the aftermath, some customers complained that their positions had been unfairly sold, with others going as far as to allege manipulation. The following day, Kraken released a statement on the incident, remarking that an internal investigation “did not find any evidence of a coordinated attack or market manipulation” and that its internal systems had operated normally.

At the time, Kraken said that it would not move to pay back users, apologizing for the losses but stating it “cannot compensate traders for the outcome of naturally occurring events in the market, nor losses due to unavoidable DDoS attacks.”

The plaintiffs are seeking unspecified damages and compensation for legal fees, as well as certification for class-action status.

The lawsuit was filed on behalf of the plaintiffs by the Florida-based Silver Law Group, which has been involved in lawsuits filed against the now-defunct exchange Cryptsy and digital currency startup Coinbase. Wites & Kapetan, another law firm based in Florida, is also involved in the suit.

Representatives for Kraken declined further comment when reached.

Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Coinbase and Kraken.

Image via Shutterstock

A full copy of the class action complaint can be found below:

Class Action Complaint by CoinDesk on Scribd