The aftermath of the October 11 crypto market crash continues to reverberate through the industry, as leading market makers and trading firms — including Wintermute — signal possible legal action against major exchanges such as Binance.
“The Biggest Liquidation Wave the Crypto World Has Ever Seen”
Evgeny Gaevoy, founder and CEO of Wintermute, one of the largest market-making firms in digital assets, described the event as the most severe liquidation wave in crypto history. Speaking after the crash, Gaevoy highlighted the role of Binance’s Auto-Deleveraging (ADL) system — a rarely used failsafe mechanism — as a key aggravating factor.
“I believe this was the largest liquidation wave the crypto world has ever seen. On Binance, a mix of infrastructure issues, lack of preparedness, and ADL triggering at the wrong time made everything worse.
ADL isn’t meant to be used often. It’s the last line of defense — even beyond the insurance fund. Normally, exchanges rely on their insurance funds first. But because prices dropped to zero on some instruments, long positions were wiped out and short traders became incredibly profitable.
However, it wasn’t clear at what prices ADL was triggered — some settlements were clearly unfair.”
What Is ADL and What Went Wrong?
The Auto-Deleveraging (ADL) system automatically reduces profitable traders’ leveraged positions to offset losses from liquidated positions when the exchange’s insurance fund is insufficient. In theory, it’s a rare emergency mechanism designed to maintain balance in extreme market crashes.
During the October 11 collapse, however, prices in several markets plunged faster than liquidation systems could react. This caused exchanges to fail to close long positions in time — leading to massive losses.
According to Gaevoy, Binance should have used its insurance fund first, but instead, triggered ADL directly:
“In this case, some exchanges activated ADL without using their insurance funds. Many market makers, including Wintermute, were hit by unexpected ADL triggers. Some short positions were closed at bizarre, unfair prices.”
“Some Firms Are Preparing to Sue”
Gaevoy revealed that multiple market-making and trading firms saw their short futures positions forcibly closed too early, leaving them exposed with only spot long holdings as prices continued to fall.
“In the coming days and weeks, I think we’ll see many trading firms file official complaints — and even lawsuits — against the exchanges.
For Wintermute, some ADL price levels were definitely not fair. Normally, market makers maintain a neutral stance — long on spot and short on futures to hedge risk.
But when your short position gets closed during a crash, you’re left only long while the market keeps dropping — a disaster. Many firms lost money because of this. ADL sometimes kicked in at $5 when it should have at $1.”
Industry Impact and Legal Outlook
If lawsuits move forward, this could mark one of the most significant legal challenges ever faced by Binance and other major crypto exchanges regarding their risk management systems.
The October 11 crash — now being dubbed “Black Friday of Crypto Derivatives” by some traders — exposed structural weaknesses in liquidation and insurance mechanisms across centralized platforms.
With firms like Wintermute, Jump Trading, and Alameda’s successors known for holding large leveraged positions, the implications of forced ADL liquidations could spark industry-wide reforms — and potentially legal precedents for the protection of institutional crypto participants.
