Coinbase-Cryptsy Lawsuit Will Head to Jury Trial
Coinbase has lost another appeal in a lawsuit brought by former customers of the defunct cryptocurrency exchange Cryptsy, and the case will now proceed to a jury trial.
An appeals court in Georgia on Monday affirmed a lower court's denial of Coinbase's appeal of the case, which blames the company for failing to stop Cryptsy's chief executive from allegedly absconding with his customers' money.
In the case, plaintiff Brandon Leidel, who was a Cryptsy customer, claims that Coinbase should have actively helped prevent Cryptsy CEO Paul Vernon from laundering the funds through a Coinbase wallet.
Vernon allegedly used Coinbase to launder millions of dollars he is accused of stealing from his customers prior to Cryptsy's collapse, as previously reported.
Coinbase tried to negotiate the case in arbitration by pointing at user agreements Vernon signed when he first began using the wallet. However, a judge ruled last year that Cryptsy's customers are not bound by the same agreements that Vernon was, and therefore are not required to arbitrate the case.
Coinbase appealed this decision, but the appeal was denied by a district court.
The Eleventh Circuit Court of Appeals affirmed that decision Monday, writing that "Leidel does not seek to enforce the terms of the User Agreements, nor does he allege any tort rooted in an allegation that Defendant breached or facilitated a breach of any obligation uniquely imposed by those agreements." The decision went on to say:
"In other words, 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."
As a result, the court has opened the door for a jury trial in the class action lawsuit, which can now proceed to discovery.
In a statement, David Silver, a lawyer representing the plaintiffs, said "we are pleased, though not surprised, the appellate court affirmed the trial court's decision to keep this dispute in the public view ... We look forward to having Coinbase answer for its role in the millions of dollars in harm suffered by our clients; and we look forward to resolving these claims in court."
Coinbase did not immediately respond to a request for comment.