Coinbase Settles Cryptsy Class-Action Lawsuit For $1 Million

[Baofeng]

As per official documents:

[1] https://www.scribd.com/document/442763182/Leidel-et-al-v-Coinbase-Settlement-Cryptsy
[2] https://www.scribd.com/document/442765414/Proposed-Settlement-Leidel-v-Coinbase-Cryptsy

So after three years, Coinbase has finally settled for about $1 million for its role, - money laundering of the Cryptsy hack funds.

https://www.cryptoglobe.com/latest/2020/01/coinbase-settles-cryptsy-class-action-lawsuit-for-1-million/

Plaintiffs in the case previously filed charges against Cryptsy founder Paul Vernon over alleged negligence and violation of Florida’s Deceptive and Unfair Trade Practices Act after facing withdrawal issues related to the exchange’s hack, which saw approximately 10,000 BTC stolen from clients. Coinbase was later accused for being involved in laundering $8.2 million in funds and abetting in the exchange theft.

Coinbase’s previous attempt for dismissal of the suit and settlement through arbitration was denied by the court, and the three-year-long case was nearing a jury trial.

https://www.cryptoglobe.com/latest/2020/01/coinbase-settles-cryptsy-class-action-lawsuit-for-1-million/

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[audaciousbeing]

Its a good one if I am asked because it shows that when you violate the rule and you are an accomplice for someone to break the rule, then be ready to pay the price. This activity can be looked from several areas. One it shows that regulatory authorities are looking and there are laws that can compel actions even though the laws are not specifically made for crypto. Another angle is that I see crypto related businesses tighten their KYC regulations in other to ensure that to ensure they are not liable should issues like this arise.

[gentlemand]

Is this the first time a judgement like this has been made? I can't think of any other equivalent.

It makes you wonder about all these reports of Binance and Huboi OTC desks disposing of vast amounts of stolen funds in the semi open. I guess they have unhelpful jurisdictions to hide behind.

If nothing else this will make mixed funds all the more toxic in the minds of exchanges even when they're impossible to pin to any crime - yet.

[figmentofmyass]

Is this the first time a judgement like this has been made? I can't think of any other equivalent.

not a judgment. this didn't go to trial. it took years of litigation before they settled though. i wish they did go to trial---it would be a lot more informative re precedent.

as i read it, the claim was mostly based on the notion that coinbase should have known the source of vernon/cryptsy's bitcoins were illegitimate. in other words, they didn't do enough AML/KYC. vernon told them the source of funds = crypsty's revenues and his personal holdings/mining output. the plaintiffs' primary claim was that it should have been obvious vernon was selling too much bitcoin for that to be true.

i'd love to see that theory tested in a jury trial.

It makes you wonder about all these reports of Binance and Huboi OTC desks disposing of vast amounts of stolen funds in the semi open.

this case was more about breach of fiduciary duty and negligence. the first thing that comes to mind for me is quadrigaCX's accounts at kraken. https://twitter.com/jespow/status/1091863628066770944

the parallel to this case would be, what due diligence should kraken have done on quadrigaCX's accounts? why did those accounts exist at all?

[CryptoBry]

Its a good one if I am asked because it shows that when you violate the rule and you are an accomplice for someone to break the rule, then be ready to pay the price. This activity can be looked from several areas. One it shows that regulatory authorities are looking and there are laws that can compel actions even though the laws are not specifically made for crypto. Another angle is that I see crypto related businesses tighten their KYC regulations in other to ensure that to ensure they are not liable should issues like this arise.

I agree. Let's hope that this can be a big lesson to all legitimate cryptocurrency exchanges never to allow illegally-sourced digital assets to be laundered using their platforms. These are considered as financial transactions so existing laws can be applied here, and I think we already got many of them just waiting to be applied. I am not for too much regulation but at the same time I am not for adopting the "laissez faire" approach because the cryptocurrency industry is one of the top when it comes to the presence of scams and frauds. In fact, the whole industry must make a good stand against this menace. As a consequence, we are going to see stricter and more elaborate KYC system to be implemented by exchanges. And that can be both bad and good. We need the law to combat bad or evil people operating here and let's see if 2020 can be that year when these people are purged out of this fledgling industry.

[dothebeats]

Is this the first time a judgement like this has been made? I can't think of any other equivalent.

not a judgment. this didn't go to trial. it took years of litigation before they settled though. i wish they did go to trial---it would be a lot more informative re precedent.

I really wish they did as well. There's just too much knowledge to be had in this case that could potentially change the landscape for future cases such as this. I guess Coinbase only did it for the money without even thinking of the possible legal implications of their actions.

Pretty sure they did, just not sure whether they would turn down the money or risk the possible legal implications.

as i read it, the claim was mostly based on the notion that coinbase should have known the source of vernon/cryptsy's bitcoins were illegitimate. in other words, they didn't do enough AML/KYC. vernon told them the source of funds = crypsty's revenues and his personal holdings/mining output. the plaintiffs' primary claim was that it should have been obvious vernon was selling too much bitcoin for that to be true.

Why would an exchange like Coinbase operate as if they don't know the protocol and proper procedures for AML/KYC? Guess as long as you have the weight and you have the proper connections and exposure the crypto market, KYC/AML regulations wouldn't matter much to you, or you wouldn't be subject to thorough investigation/checks like they do on the normal traders.

And the volume speaks for itself, too, just like what the plaintiffs' notion to the case is. At the least, it should have rang the bells a little for Coinbase.

this case was more about breach of fiduciary duty and negligence. the first thing that comes to mind for me is quadrigaCX's accounts at kraken. https://twitter.com/jespow/status/1091863628066770944

the parallel to this case would be, what due diligence should kraken have done on quadrigaCX's accounts? why did those accounts exist at all?

Up to now, QuadrigaCX's case is still pretty vague and quite sketchy to me. Why would those accounts even exist on Kraken and whoever did that must have had a time machine to know that the CEO who holds the funds would die, and would die of a disease WHICH ISN'T EVEN TERMINAL. I guess that's a different case with pretty interesting points to consider IMO.

[si14bet]

Its a good one if I am asked because it shows that when you violate the rule and you are an accomplice for someone to break the rule, then be ready to pay the price. This activity can be looked from several areas. One it shows that regulatory authorities are looking and there are laws that can compel actions even though the laws are not specifically made for crypto. Another angle is that I see crypto related businesses tighten their KYC regulations in other to ensure that to ensure they are not liable should issues like this arise.

I agree. Let's hope that this can be a big lesson to all legitimate cryptocurrency exchanges never to allow illegally-sourced digital assets to be laundered using their platforms. These are considered as financial transactions so existing laws can be applied here, and I think we already got many of them just waiting to be applied. I am not for too much regulation but at the same time I am not for adopting the "laissez faire" approach because the cryptocurrency industry is one of the top when it comes to the presence of scams and frauds. In fact, the whole industry must make a good stand against this menace. As a consequence, we are going to see stricter and more elaborate KYC system to be implemented by exchanges. And that can be both bad and good. We need the law to combat bad or evil people operating here and let's see if 2020 can be that year when these people are purged out of this fledgling industry.

It would be good if you were right in these assumptions about the future, because today it is thought and the top exchanges are engaged in such things, but who goes to them, it is likely that all is paid...