The UK’s Commercial Court has refused to grant an arbitration award to Payward, the company behind crypto exchange Kraken.
“Enforcement of the Final Award would be contrary to UK public policy,” so the Court will not recognize or enforce the award. The presiding judge, Robert Bright, noted that Payward’s arbitration claim “accordingly fails.”
The case is based on a British man who allegedly lost roughly 600,000 British pounds, or $770,000, in 2020.
Maxim Chechetkin claimed he deposited money into his account, some belonging to him and some to his parents, and then subsequently used the money to make trades.
“He said that he deposited about £289,000 over four days in March 2020. His trading positions turned negative and from May 2020 he was trying to recover the situation,” Bright wrote.
According to the court filing: “The Kraken platform allows negative positions as long as the customer tops up the account. He did so, making further deposits and hoping to trade his way out of trouble. He said that he started to panic, made more deposits and more trades, and this ultimately led to the loss of the whole balance.”
Chechetkin then sought to recoup those losses by seeking legal action, claiming that Payward breached the Financial Services and Markets Act 2000. While the Court does not weigh in on Chechetkin’s FSMA claims, Bright does note that Payward was “almost certainly committing a criminal offense” if the claims are true.
However, because of the terms and conditions Chechetkin signed when he created his Payward account, he agreed that “any arbitration will occur in San Francisco, California” and “that arbitration will be conducted confidentially by a single arbitrator in accordance with the rules of [Judicial Arbitration and Mediation Services Rules].”
The arbitrator sided with Payward, finding that Payward’s terms and conditions were clear and “easily available online.”
“He has failed to prove procedural or substantive unconscionability,” the arbitrator continued.
In July of last year, the arbitrator granted the claimants — Payward’s — motion to confirm arbitrability and jurisdiction, denying Chechetkin.
However, Chechetkin pushed back against Payward receiving an award from a ruling where the seat of arbitration was San Francisco, California, and the UK Court later decided that the arbitration award would not be granted to Payward.
“While the situation is regrettable, we stand firm that we are being incorrectly blamed for the losses incurred as a result of an individual’s trading strategy. We also consider that our Terms are clear and that this individual was happy with them until he made losses,” a Kraken spokesperson told Blockworks via email.
