On 10 October 2025, the crypto market experienced one of its biggest crashes in its (short) history. While Bitcoin plummeted from USD122,000 to around USD104,000 (an approximate 16.5% decline) within hours, some altcoins cratered by up to 80%. All in all, approximately USD19 billion of leveraged crypto positions were reported to be liquidated, marking it as the biggest wipeout to date.
Although initial reports suggested that President Trump’s 100% tariff threat on China on the same day was the main reason for the crash, many ultimately believe that the core reason of this crash were the systematic vulnerabilities within the trading system of Binance, the world’s largest crypto exchange.
Binance’s margin system is different from industry standards, as they allow proof-of-stake derivatives and yield-bearing stablecoins as collateral, instead of limiting traders to USDT or traditional coin-margined positions. This means that Binance’s Unified Account Feature values collateral assets with its own market data, instead of external oracles.
During the period between Binance’s oracle price update announcement on 6 October 2025 and its implementation on 14 October 2025, attackers reportedly seized on this opportunity by exploiting the faulty valuation method in the collateral valuation system. After attackers had dumped approximately USD90 million of USDe (one of the stablecoins that dropped the most on Binance’s platform), the stablecoin’s price was displayed on Binance to be USD0.65, despite it remaining at USD1 on other exchanges. This price drop instantly resulted in traders’ collateral being devalued and forced liquidations. The attackers profited based on the shorts that they had opened prior to the liquidation.
Due to Binance’s system being overloaded, traders could not execute risk-control orders and stop-losses, thereby preventing traders executing stop orders or closing their positions. Despite this problem happening on Binance’s system, its global dominance meant that a localised system failure quickly evolved into a global issue.
In response, Binance pledged to compensate users whose transactions failed to execute during the crash, but specified that losses caused by “market fluctuations or unrealized profits” would not be covered.
Many Binance users were left disgruntled by the insufficient compensation, as their losses had been caused by Binance’s system failures. Should Binance users wish to claim compensation or damages from Binance, they would have to lodge their claims through arbitration, as per the Terms of Use. Accordingly, its users may consider seeking the following recourse if they wish to move ahead:
- Seek damages for Binance being reckless or negligent in the design and/or management of Binance’s platform, resulting in users experiencing platform technical failures;
- Seek damages for Binance being reckless or negligent for failing to promptly and adequately address known vulnerabilities in its collateral valuation system; and
- Seek damages for Binance breaching an implied term that it, as the supplier, would offer its services via its platform with reasonable care and skill.
If you have been affected by Binance’s platform during the 10 October 2025 crypto crash or require any assistance regarding crypto, please contact us to seek advice.
