European users of eToro claim they got the run on leveraged crypto positions, which were abruptly closed in the face of what the trading platform described as “extreme market volatility”.
Retail investors in the UK and US are prohibited from buying crypto derivatives, including financial contracts that allow trading at margins where investors only have to pay a small fraction of the notional payout of the contract.
EToro customers in European countries that allow such trading in Contracts for Difference (CFDs) were informed by email on Friday evening January 8th: “If you do not increase the margin to 100%, the position will be closed today at 21:00 GMT. ”
This came with an explanation that customers with available funds could keep positions open by adding funds, while those who did not have available funds had the option to close other positions to free up funds.
However, disgruntled traders have reached out to Twitter stating that four hours later, eToro closed all leveraged positions in cryptocurrencies, including those that users had tried to keep open.
“EToro has broken the contracts it has made with its clients,” said Slavko Vesenjak, a lawyer in Slovenia who represents several eToro clients from across Europe. “A four-hour notification before any leveraged crypto positions closed had people in their different time zones wake up and close their positions.”
Amy Butler, eToro’s global public relations director, said the vast majority of eToro’s customers will not be affected by the changes.
“We understand that there are several dozen frustrated customers and we are working hard to resolve their frustrations,” said Butler.
Also last week, eToro, which allegedly plans to go public for $ 5 billion, increased the required deposit amount from $ 200 to $ 1,000 to meet overwhelming demand from hopeful crypto traders attracted by soaring prices. to be able to cope better.
The temporary decision to increase the deposit minimum is due to increasing demand, Butler said. Regarding leveraged crypto removal in Europe, that decision was made “from an internal risk management perspective,” Butler said, adding that it was unrelated to any potential IPO plans.
“The eToro customers get their money. If eToro doesn’t reimburse them, the state of Cyprus will, ”said Jurij Toplak, law professor at Alma Mater Europaea in Slovenia and adjunct at Fordham Law in New York.
Toplak said that aggrieved eToro clients he represents will contact the Cypriot Securities and Exchange Commission to request the revocation of the eToro license.
“I think cryptocurrencies have just gone up and eToro has found that they are unable to pay out that much money to customers,” Toplak said in an interview. “And then they just canceled the contracts.”