On Friday, December 22, the price of bitcoin went down amid a deep correction of the cryptocurrency market, and one of the world's largest exchanges Coinbase suspended trading for two hours, citing technical problems related to the flow of traffic. The Outline spoke with the legal expert in the field of protecting the rights of investors and consumers Ross Khami.
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American stock exchanges have the right to suspend trading only in accordance with the rules of the Securities and Exchange Commission (SEC); if the company intends to make an important statement, or in an imbalance between the number of buying and selling orders.
In the case of cryptocurrency exchanges, the issue of protecting consumers' rights is much more difficult to solve. The SEC has already warned investors that bitcoin-exchanges may unexpectedly completely stop work or suspend trading in the event of technical failures, hacker attacks or fraudulent schemes.
Despite the problems of regulating the new industry, dissatisfied users of Coinbase can sue the company if the decision to suspend trading costs them money, says New York attorney Ross Khami.
Courts have not yet ruled on whether federal securities laws or consumer protection laws apply in the cryptocurrency context. We’re starting to finally see a lot more lawsuits filed against companies that are issuing tokens in the ICO context. We’re also seeing lawsuits filed against exchanges. We don’t yet know how things will pan out with Coinbase, but if investors lose money from a hack or shutting down trading, there is sure to be litigation.
Despite the fact that the decision to suspend trading is not illegal, this does not mean that investors can not make a claim. Moreover, other exchanges continued to trade in a rapidly declining market and increased traffic.
Kami believes that, given the experience of investors of the infamous MtGox stock exchange, it is unreasonable to store significant funds on stock exchange purses.