Binance has urged the UK’s Competition Appeal Tribunal to strike out £9 billion in damages sought by a first-of-its-kind collective action targeting alleged collusion in the digital assets market.
Brian Kennelly KC, counsel to cryptocurrency exchange Binance, argued in a certification hearing today that a subsection of the proposed class is not entitled to several billion pounds in damages because they failed to mitigate their losses.
Binance, Bittylicious, Kraken and Shapeshift are accused of “deliberately” colluding to delist BSV – the original Bitcoin – in 2019.
This, according to proposed class representative Lord David Currie, reduced competition in the UK and harmed BSV’s ability to innovate and become a “top tier” cryptocurrency.
Currie, a former chair of the UK’s Competition and Markets Authority, filed the standalone £9.9 billion claim in July 2022, alleging the four exchanges publicly coordinated the delisting of BSV through a series of posts on X, then known as Twitter, between 12 and 16 April 2019.
He is pursuing the opt-out claim on behalf of approximately 240,000 investors – mostly individuals – who live in the UK and owned BSV on 11 April 2019.
The proposed class is divided into three sub-groups. Cryptocurrency investors who held BSV coins on 11 April 2019 and sold at least some of their BSV coins afterwards, but before the claim was filed, are seeking up to £20.6 million in damages.
Meanwhile, up to £925.7 million is being claimed for users of Binance or Kraken who held BSV coins in their accounts and lost access to their BSV coins as a result of the de-listing.
Class members who held BSV coins and continued to hold their BSV coins when the claim was filed on 29 July 2022 want up to £9 billion in damages.
But Kennelly said today that the third group of class members could have reasonably sold their investments “without difficulty” and reinvested in another cryptocurrency such as BTC or BCH when the four defendant cryptocurrency exchanges announced their plans to delist BSV.
The events constituting the alleged infringement were “highly publicised”, the market was “highly liquid” and the fact that thousands of the class members sold at least some of their BSV coins shows that holders were “not locked in or reduced to retain the BSV in any way”, Kennelly said.
By deciding to keep the BSV after the alleged infringement, those class members broke the chain of causation, he argued. That was an “entirely voluntary position, which was not induced by the proposed defendants”, Kennelly added.
“The basic principle governing the award of damages is that the claimant is entitled to be compensated for losses caused by the defendant’s breach, but if the claimant could reasonably have prevented that loss and chose not to do so, the defendant is not liable for it,” he said.
He cited Lord Justice George Leggatt’s ruling in Thai Airways v KI Holdings, which said a claimant must take all reasonable steps to mitigate its loss and cannot seek damages for loss that it could have avoided.
The strike-out, Kennelly argued, is also necessary because of the “very unsatisfactory” and “extraordinary situation” that the proposed defendants are in, since the subset group who held BSV coins and continued to own them on 29 July 2022 is seeking between £26 million and £9 billion.
This issue “cries out for an early resolution” so the parties “know where they stand” and the defendants don’t have this “hanging over them all the way to trial”, he said.
Proposed class representative Currie alleges that the cryptocurrency exchanges’ collusion caused persistent long-term effects for holders of BSV and stopped BSV from developing into a “top tier” cryptocurrency like Bitcoin.
The claimant’s expert, Oxera partner Robin Noble, plans to support those allegations by comparing the price of BSV in April 2022 to that of a counterfactual price derived from the currently traded price of a ‘top-tier’ cryptocurrency benchmark.
However, Kennelly said the foregone growth effect argument that BSV missed out on developing as a cryptocurrency is “irrecoverable in law”.
The class was widely aware of the de-listing, he said, as in the context of this case, and as argued by the proposed class representative, Twitter was a medium “particularly well suited” to notifying the holders of BSV, who are “more online” than the average investor. That means the class was “likely to see” online news, Kennelly added.
However, Noble contends that the publicly available information suggests that a significant proportion of BSV holders may not have been aware of the de-listing and so were not in a position to offload their holdings.
Noble also argues that the alleged infringement caused the price of BSV to fall following the de-listing, claiming BSV was worth around £55 on 11 April but fell by around 28% to approximately £39 one week later.
But Kennelly said today that this “misunderstands” the breach date rule in Smith New Court Securities Ltd v Citibank, which stipulates that the normal rule for the assessment of damages is that the loss is assessed at the date the relevant wrong was committed – because it’s the “ability of the market that is important”, Kennelly said.
Sarah Ford KC, counsel to the proposed class representative, said today that Kennelly’s submission on the breach date rule is premised on what an individual claimant should have done, but what an individual does cannot be applied to a large class.
“This is also a reason why this application raises novel issues which are not suitable for strike-out, because what we’re getting into here is a question about how these established concepts of mitigation and causation apply in the context of collective proceedings when one is seeking to quantify an aggregate award of damages in respect of an entire class,” she said.
“This is necessarily an area of developing jurisprudence, which is why one should not strike out at this stage,” she added.
The tribunal reserved its judgment.
Counsel to BSV Claims
Velitor Law
Partners Seamus Andrew and Christopher Lillywhite in London, assisted by Liam Spender, Jason Rose and Inês Santos
Brick Court Chambers
Sarah Ford KC
4 New Square
Nick Bacon KC
Brick Court Chambers
William Hooper
Economics
Oxera Consulting
Partner Robin Noble in London
Litigation funder
Software Holdings
Counsel to Binance
Allen & Overy
Partners Arnondo Chakrabarti, Kristina Nordlander and Imogen Carr in London, assisted by Nicholas Gomes, Mohamed Sacranie, Loraine MacDonald, Laura Burton, Nicholas Bushnell-Wye, Andri Boda and Ali Ahmad
Blackstone Chambers
Brian Kennelly KC and Jason Pobjoy
Counsel to Bittylicious
Band Hatton Button
Counsel to Kraken
Reynolds Porter Chamberlain
Partners David Cran and Chris Ross in London, assisted by Gowri Chandrashekar and Rosy Gibson
Counsel to Shapeshift AG
Hogan Lovells
Partners Nicholas Heaton and Christopher Hutton in London, assisted by Juliette Parkinson
