US Court Dismisses Lawsuit Against Decentralized Exchange Bancor Over Feature Suspension

The case highlights one of the many lawsuits filed by investors against service providers for financial losses in the volatile cryptocurrency market.

A US federal court has dismissed a lawsuit filed by investors against Bancor, a decentralized cryptocurrency exchange, over the suspension of an investment protection feature. The court ruled that Bancor, its founders, and related entities cannot be sued in the US due to jurisdictional issues.

The lawsuit was filed by a group of US cryptocurrency investors who claimed that Bancor had suspended a key investment protection feature, which they argued exposed them to financial risk.

Bancor had introduced an impermanent loss protection feature in late 2020, designed to shield liquidity providers from market volatility. The platform compensated users for their losses by issuing its native token BNT, which they could sell to recoup their losses. However, in June 2022, Bancer suspended this program, citing “hostile market conditions.”

As a result, liquidity providers who relied on this protection suffered permanent losses when the program was halted, prompting them to sue Bancor for removing the risk protection feature without proper notice.

After reviewing the case, Judge Robert Pitman of the US District Court for the Western District of Texas ruled on September 9 that the investors failed to provide sufficient evidence showing that the cryptocurrency transactions occurred in the US or fell under US jurisdiction. He advised the plaintiffs to refile their claims in Israel or Switzerland, where Bancor and its founders are based.

The court also found that Bancor, which operates out of Israel and Switzerland, does not have sufficient ties to the US for the court to exercise personal jurisdiction.

Additionally, the court ruled that US securities laws do not apply to Bancor in this case due to extraterritorial concerns, meaning US laws cannot be enforced beyond the country’s borders.

The case highlights one of the many lawsuits filed by investors against service providers for financial losses in the volatile cryptocurrency market. Earlier this year, Canadian investors sued Binance, the world’s largest crypto exchange, for offering derivatives products in the region without proper regulatory authorization.

The plaintiffs in that case seek compensation for being misled into buying unregistered securities.

Binance is also facing similar regulatory challenges in the US, where investors sued the exchange for selling unregistered tokens that later lost value, causing them to suffer financial losses. The digital assets involved in the case include Aelf, EOS, FUNToken, Icon, OMG Network, Quantstamp (QSP), and Tron.