Any institution that routinely deals with customer money will be a prime target for lawsuits, but Coinbase, one of the most popular crypto exchanges on the scene, was virtually inundated with legal complaints last month, all seeking remedies. collectives.
On Tuesday, a class action lawsuit was deposit in the California District Court, arguing that Coinbase regularly fails to secure accounts. The plaintiff in the lawsuit, Manish Aggarwal, alleges that his Coinbase wallet was emptied of $200,000 in April this year, according to the complaint. The lawsuit further states that when Aggarwal attempted to go to Coinbase with the issue, the systems subjected him to “a recursive loop of impenetrable screens that prevented him from explaining his situation to any human being and was unable to repair the theft of his savings.”
The lawyers claim that Coinbase told Aggarwal that someone gained access to his account through his Google Authenticator code. According to the complaint, Coinbase told him it is not responsible for stolen crypto which is “inadmissible and unenforceable” under California policy.
A Coinbase spokesperson told Gizmodo in an emailed statement that the company is taking “extensive security measures to ensure the safety of our customer accounts. We educate our customers on how to avoid cryptocurrency scams and report known scams to the appropriate law enforcement authorities.
Although this latest lawsuit against Coinbase is only a drop in the bucket for all of the crypto wallet hacks, four separate lawsuits have been filed against Los Angeles-crypto exchange based since early August. It all started just over a week after the Securities and Exchange Commission announced it has been investigating whether the exchange had misclassified its assets when it allegedly have listed his assets like titles throughout. Just days before this news broke, the SEC also had knocked down the hammer on former Coinbase director Ishan Wahi alleging he engaged in insider trading by telling his brother and a friend about the transactions.
The debate over whether crypto should be treated as security has cropped up time and time again in recent months. SEC Chairman Gary Gensler wrote in a Wall Street Journal Editorial last week stating “There is no reason to treat the crypto market any differently than the rest of the capital markets just because it uses different technology.”
The first of two civil lawsuits filed Aug. 4 claimed that Coinbase routinely lied and misled users about the company’s assets. has been put in the exchange. Class action plaintiffs filed by investment law firm PomerantzLLP in New Jersey District Court, Coinbase claims did not tell users that their assets could be used as property of the exchange in the event of bankruptcy, and that all money placed in Coinbase should have been registered as securities. A second aspiring class action lawsuit, filed in Delaware District Court this same day, wants the same hold the feet of the firefight on whether the company would use its users’ crypto as its own assets in the event of bankruptcy.
The lawsuits base this complaint on the protection of their assets in the event of bankruptcy on May 10 quarterly filing, who said:
“Because crypto assets held in custody may be considered the property of a bankrupt estate, in the event of bankruptcy, the crypto assets we hold in custody on behalf of our clients could be subject to legal proceedings. bankruptcy and these customers could be treated as our general unsecured creditors.
Coinbase has, of course, applauded the latter particular complaint. CEO Brian Armstrong went out of his way to tell users that they were “not at risk of bankruptcy,” but that the SEC disclosure was part of a requirement by the federal agency. He also apologized to users for not making it clear that legal protections for crypto assets “have not been tested in court” and that it is “possible” that crypto could be considered an asset of the company. company if ever the company went bankrupt.
But the legal scavengers weren’t done circling. Another aspiring class action lawsuit followed the first two later in August, filed by Georgia resident George Kattula, along with over 100 other Coinbase wallet holders. The complaintfiled in Georgia District Court on August 15, argued that Coinbase failed to register its assets as securities, failed to secure customer accounts, and had in the past blocked consumers from accessing to their accounts “for long periods or permanently”. while not responding to complaints.
Users have made rumors about problems accessing funds in their accountfearing that the exchange is about to cut users off from their crypto as others have before. The company previously told Gizmodo that the issue arose due to to solve the technical problems that had been fixed. Yet despite attempts to calm the nerves millions of Coinbase users, the company had to move away of bankrupt crypto firms like Celsius or Three Arrows Capital to show that it’is not yet ready to hoist his own headstone.
Paul Grewal of Coinbase legal director, got out of his way to tell users “Your funds are your funds and your crypto is your crypto.”
All together, these budding class actions still have a long way to go before financial penalties reach the plaintiffs’ hands.. The August 15 lawsuit seeks damages of approximately $5 million for class members.
Coinbase struggled hard in the middle the ongoing crypto winter. Company initial reports cancel job offers of potential employees were followed by an announcement that the exchange was removing more than 1,000 positions. In a recent maintenance with CNBC, Armstrong said he expects this current crypto winter to last a year to a year and a half, or even longer.