In the Coinbase and now defunct crypto exchange, Cryptsy case, where the lawsuit alleges Coinbase of negligence in account oversight and assisting the guilty Paul Vernon for stealing $8.2 million bitcoins has been ordered by the court to move to the jury trial.
US court rules Cryptsy and Coinbase lawsuit for public trial
In yet another lawsuit appeal, Coinbase has lost to its former customer that will now proceed on to a jury trial. The class-action lawsuit related to money laundering filed by the law firm Silver Miller against one of the biggest cryptocurrency exchanges, Coinbase will be held in an open court instead of a private boardroom.
In Georgia, the Eleventh Circuit Court of Appeals attested the denial of Coinbase’s case appeal by a lower court. The case in order basically alleges that Coinbase assisted in the laundering of about $8.2 million stolen bitcoins that value more than 100 million US dollar today.
In July 2017, Paul Vernon, the CEO of now-bankrupt crypto exchange Cryptsy had been found guilty of stealing the cryptocurrencies of his company’s users, who was later on ordered to pay $8.2 million in damages. The law firm Silver Miller was also involved in the case blamed Coinbase for failing to stop Vernon from absconding with the user’s money.
Between the time period of 2014 and 2016, before fleeing the country, Vernon used his Coinbase account to convert all the stolen bitcoins into fiat. The ongoing class-action lawsuit by the law firm also claims negligence in account oversight as stated:
“Plaintiffs seek damages based upon the unlawful conduct of COINBASE in failing to properly monitor customer accounts that held investors’ money and ignoring its duty to investigate suspicious activities under U.S. anti-money laundering rules.”
Coinbase in yet another mess
The law firm, Miller is glad that the case is going to be a public trial, stating:
“Coinbase’s ascension to the top of the crypto exchange heap has not come without missteps in its business practices along the way. We look forward to having Coinbase answer for its role in the millions of dollars in harm suffered by our clients.”
Coinbase tried the arbitration route to negotiate by pointing out the user agreements for wallet signed by Vernon. But, last year, the court ruled that the users are not tied by the same agreements as the CEO. Hence, the arbitration was canceled out. Coinbase appealed for this decision but was denied by the district court.
The plaintiff Brandon Leidel, who was a customer of Cryptsy claimed that Coinbase should have prevented Vernon from laundering the funds via their wallet.
On Monday, the appellate court affirmed that:
“Leidel’s claims are viable, if at all, without reference to the User Agreements, as the duties Defendant allegedly breached were not imposed by those agreements.”
This is not the first time that Coinbase has been subject to a lawsuit. In March, this year, a complaint was filed against the exchange that it was indulged in insider trading for adding Bitcoin Cash to its exchange and wallet services. Recently, Coinbase also received backlash for WikiLeaks Shop’s account suspension.
Do you think repeated Coinbase lawsuits and backlashes will affect its integrity and market value?
I am an associate content producer for the news section of Coingape. I have previously worked as a freelancer for numerous sites and have covered a dynamic range of topics from sports, finance to economics and politics.