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The Case Against Kraken

By

Jeremy

Nation

WriterETHNews.com

A lawsuit has been filed against the Kraken exchange in the wake of a crash last May that saw users’ margin positions liquidated.

Filed on July 5, 2017, a class action complaint against the Kraken cryptocurrency exchange alleges that the trading hub is responsible for losses suffered by account owners due to its wrongful acts.

Attorney David C. Silver of the Silver Law Group, is counsel for the plaintiffs and the proposed class, who saw their trading positions liquidated by Kraken during an alleged simultaneous distributed denial of service (DDoS) attack and flash crash that took place on May 7. The five plaintiffs are claiming a combined loss of 3,414.08669 Ether, which they estimate to have been worth $328,844.83 on the day of the attack. At time of press, this amount of Ether would be worth nearly $900,000.

Silver provided his perspective to ETHNews, saying, "Kraken had the obligation, ability, and opportunity to protect customers and chose not to."

The plaintiffs argue that by failing to suspend trading amid the DDoS attack and the crash, while users couldn't access their accounts, Kraken unjustly enriched itself at the expense of traders. The complaint alleges:

“Had KRAKEN’s exchange been functioning properly, the market manipulation and coordinated ‘flash crash’ and DDoS attack would not have affected the price of Ether in Plaintiffs’ and the Class’ margin accounts and would not have dropped the price of Ether to the depth to which KRAKEN perceived that it reached; and KRAKEN would not have implemented an automated liquidation of the user accounts holding Ether on margin.”

The complaint also asserts that Kraken breached contractual duties to plaintiffs by "failing to maintain adequate measures, rules, policies, and procedures for margin, liquidation, data, and security of Plaintiffs’ and the Class’ accounts and the assets therein and by improperly freezing and liquidating the Ether holdings of Plaintiffs and the Class."

The complaint seeks class action certification, trial by jury, and, ultimately, a reward of monetary, punitive, and actual damages, and/or restitution. Injunctive relief, prejudgment interest, and reimbursement for attorney costs are also sought.

Silver said the big picture question is whether the users of Kraken deserve better from their exchange or provider. He said, "The fact is when users lose money that they don't believe should be lost, they are like any other customer in any other case."

Silver provided ETHNews with a copy of the complaint, which was filed in the United States District Court, Middle District of Florida, Tampa Division:

Jeremy Nation

Jeremy Nation is a writer living in Los Angeles with interests in technology, human rights, and cuisine. He is a full time staff writer for ETHNews and holds value in Ether.

ETHNews is commited to its Editorial Policy

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