Silver Miller is acting as Co-Lead Counsel to the putative class of plaintiffs in a class action lawsuit pending against California-based Money Services Business and cryptocurrency exchange operator Coinbase, Inc. The case is pending in the United States District Court for the Southern District of Florida under Case No. 9:16-cv-81992.
According to the lawsuit, Paul Vernon — the former CEO and principal operator of a cryptocurrency exchange and Money Services Business known worldwide as Cryptsy — converted approximately $8.2 million in Cryptsy customer assets over a three-year period and liquidated to his own benefit those stolen funds through accounts Mr. Vernon and Cryptsy maintained at Coinbase. As alleged in the lawsuit, Mr. Vernon told Coinbase that the $8.2 million represented either a portion of the revenues Cryptsy had generated from its business or represented Bitcoin that Mr. Vernon himself personally owned. Despite Mr. Vernon’s assertions of business revenue and personal ownership, Coinbase — as a Money Services Business regulated under the FinCEN division of the U.S. Treasury Department — was required to reasonably verify those facts. The lawsuit asserts that Mr. Vernon’s claims were untrue, and Coinbase failed to satisfy its regulatory requirements or perform any reasonable investigation into the suspicious activity in Mr. Vernon’s and Cryptsy’s Coinbase accounts. Although the exact amount remains undetermined, the lawsuit estimates that the value of the digital funds laundered through Coinbase exceeds $8,200,000.00. Mr. Vernon is believed to have absconded with those funds when he abandoned Cryptsy and fled to China in late-2015.
As stated in the lawsuit, the class of victims pursuing relief includes: “All CRYPTSY account owners who: (1) deposited Bitcoins, alternative cryptocurrencies, or any other form of monies or currency at CRYPTSY, (2) had such currency liquidated by VERNON and CRYPTSY through COINBASE, and (3) have been denied access to their accounts and funds between May 22, 2014 and the present date.” The lawsuit asserts against Coinbase claims for aiding and abetting breach of fiduciary duty, aiding and abetting conversion, negligence, and unjust enrichment.
In June 2017, we defeated Coinbase’s efforts to have the lawsuit shifted to a private arbitration forum rather than the public forum that the U.S. courts provide. As Silver Miller Co-Founder David Silver was quoted saying at the time: “Coinbase does not want to be exposed in open court about what its business practices were in 2013-2015. Coinbase had a fiduciary duty to know its customers and report suspicious transactions. Simply stated, they chose not to do that. We look forward to litigating these claims.”
If you have lost money at Coinbase and are interested in joining the class action, please contact us with information about your claim and your investment losses.