FORCED ACCOUNT LIQUIDATIONS

We provide legal assistance with crypto asset liquidations on both DeFi and CeFi platforms

BACKGROUND

Forced liquidation refers to an involuntary conversion of assets into cash or cash equivalents (such as stable coins). It is a mechanism that creates market orders to exit leveraged positions. The term liquidation simply means selling assets for cash. Forced liquidation means that this selling happens automatically when certain conditions are met.

In the context of cryptocurrencies, forced liquidation happens when the investor or trader is unable to fulfil the margin requirements for a leveraged position. The concept of liquidation applies to both futures and margin trading.

ACCOUNT LIQUIDATION CHALLENGES

Forced liquidations may result in substantial disputes, we can examine the margin issues and other aspects of the customer’s investments and potential losses to determine if legal claims can be asserted.

Most claims regarding forced liquidations rely on fiduciary duty standards, covenants of good faith and fair dealing. These claims may allege that the firm benefitted from charging margin interest and reaping increased commissions on larger trades when the market was rising but sold its customers out when the market turned sour.

For example, in these volatile times, a CeFi lending platform may provide a customer with a specific deadline to meet a call, but then observe a further decline in the price or credit-worthiness of the customer’s collateral that requires more immediate action, such as an internal change to the amount of release the platform is willing to give on such collateral, triggering liquidation before the previously-stated deadline.

All DeFi and CeFi platforms have reserved for themselves the contractual right to change requirements at any time, so in terms of disputes, customers have the right to claim based on their reliance on the platform’s prior actions or statements, since they might had more time to meet a call by depositing assets or selling on their terms.

Some lending platforms have also exposed their accountholders to numerous “flash crashes” and Distributed Denials of Service (DDoS) that engendered wild valuation swings in several cryptocurrency markets, including the market for Ether coin. Those events triggered forced liquidations of client margin accounts and caused tens of millions of dollars in damage to accountholders who were unable to halt their losses while the platform’s web servers were overburdened to the point that it was virtually impossible for accountholders to log in and/or interact with the system using the web front.

These situations constitute fraud, negligence, and false advertising, private individuals and companies can be entitled in most cases to compensation.

OUR CLIENTS

Our solicitors have the expertise to represent a wide variety of clients both from futures and margin trading. These include borrowers and lenders of cryptocurrencies and lending institutions.

CONCLUSION

The unsettled legal landscape and regulations associated with cryptocurrencies raise significant risks for anyone getting involved in this field. The best practice is to be proactive and seek qualified legal advice before moving forward, consulting experienced counsel as soon as possible can mitigate liability and protect your rights.

Forced account liquidations can be hostile and frustrating , we help with most scenarios of crypto assets liquidation including the following cases:

• CEFI and DEFI asset liquidations
• Alternative Dispute Resolution
• Out-of-Court Settlements
• Compensation Plans
• DDoS Attacks
• Flash crashes

Our Process

1. Planning The Case

Case management must begin with a clear understanding between the attorney and the client as to both outcome objectives. The attorney should inform the client whether the attorney believes it is possible to achieve the client’s expectations at a cost acceptable to the client.

Like a well planned trip, liquidation claims should start with a good roadmap, flexible enough to accommodate changes in strategy needed as the case proceeds.

2. Evaluate Situation

We will review your documents and other available evidence relevant to the matter, and prepare a written preliminary assessment of the ways in which the documents and other evidence might affect the outcome objectives, including the law or laws that most likely would govern the case.

3. File The Case

Resolving legal matters through settlement frequently offers more advantages than opting for litigation, with the exception of unusual cases. Unless the client strongly opposes settlement or there are compelling business, personal, or strategic reasons to defer or avoid settlement, a collaborative effort between the client and solicitor is essential to devise a plan for a good faith settlement attempt at the earliest opportunity.

Following the completion of the Preliminary Case Assessment, or even earlier if deemed suitable, our solicitors proactively suggest strategies for structuring a settlement proposal. This approach significantly improves the likelihood of attaining both outcome and cost objectives through settlement, underscoring our dedication to efficient and effective legal resolution.

Expert Guidance

Our clients benefit from expert guidance across the legal spectrum of the blockchain. Legal cases often require the assistance of lawyers with not just specialist knowledge and years of expertise but also sensitivity, understanding and assertiveness. Our lawyers will work with you to achieve the best results possible, while always treating your case with the individual focus it requires.

Data Protection

Data security is always an important part of our business. We are entrusted with highly sensitive information which needs for effective data security. We focus on ensuring our clients maximise data value, while addressing global data privacy requirements and proactively reducing security risk to protect clients when their future is on the line.

We Take Care

We monitor the progress of your claim or dispute, coordinate the legal process and ensure that there is a consistency of instructions and advice to our clients handled by our legal team.