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09 Jul 2024

Crypto in the CAT – competition law meets digital assets

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June was off to busy start for Binance as it sought to strike out a £9.9 billion damages claim brought on behalf of cryptocurrency investors in the UK Competition Appeal Tribunal (the "CAT"). The claim is not only significant in terms of the amount claimed, but it is the first UK competition claim over crypto assets. We therefore await the CAT's decision with interest, but in the interim, what is the case all about?

The case

The claim relates to the cryptocurrency Bitcoin Satoshi Vision ("BSV"), an 'offshoot' from the cryptocurrency bitcoin. BSV Claims Limited, the special purpose vehicle bringing the claim on behalf of an estimated class of 240,000 BSV investors, seeks a Collective Proceedings Order on an opt-out basis to challenge Binance's alleged anti-competitive behaviour.

The BSV investors' claims

The BSV investors allege that Binance colluded with fellow crypto-exchanges Bittylicious, Payward and ShapeShift (in breach of both EU and UK competition law) in 2019 by tweeting their intentions to delist BSV, and subsequently delisting it, from their respective crypto-exchanges. It is alleged that the four exchanges colluded to prevent BSV from trading and that this was anti-competitive as it reduced competition between digital assets in the UK.

This also allegedly caused the value of BSV to drop – without access to crypto-exchanges and the high trading volumes that come with them, BSV lost liquidity. Further, the ongoing exclusion from crypto-exchanges over time meant that investors in BSV saw rival cryptocurrencies rocket in value, whereas BSV did not experience the same growth.

The arguments for strike-out

In support of its strike out application, Binance told the CAT that the BSV investors failed to mitigate their losses. Binance argued that BSV investors would have been well aware of the pending delisting of BSV in 2019 and should have acted accordingly to mitigate their losses by selling their holdings. Binance alleged that it was unreasonable to hold onto the currency once the exchanges announced their intentions to delist the currency.

However, Counsel for the BSV investors maintained that group competition claims involving these assets is a developing area of law and as such, the claim should be allowed to proceed to full trial where actual facts, rather than assumed facts, can be established.

What else is new for Binance and BSV?

BSV's creator is Dr Craig Wright, an Australian computer scientist. He has been in the headlines recently due to his claims to be Satoshi Nakamoto, the original inventor of bitcoin. These claims were found to be false by the High Court in May 2024. The repercussions of this judgment will likely have a big impact on any pending crypto litigation involving Dr Wright.

Meanwhile, Binance is finding itself in regulatory hot water in many jurisdictions around the world. In particular, it was recently hit with a $4.3 billion fine in the US for breaches relating to international sanctions and anti-money laundering measures. Clearly, even the decentralised 'wild west' of crypto is not exempt from, and no match for, well-equipped national regulatory bodies.

We look forward to bringing you more on the CAT claim as it happens.

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