Cryptsy victims reach a $1m settlement with Coinbase

Cryptsy victims reach a $1m settlement with Coinbase

  • Ali Raza
  • 14th January, 10:01
  • Coinbase recently managed to reach a settlement with the victims of a former crypto exchange, Cryptsy.
  • The exchange agreed to pay almost $1 million after being accused of allowing hackers who robbed Cryptsy to launder a large portion of the stolen funds.
  • The exchange has been denying its guilt for three years and trying to settle since late 2016, finally managing to put the issue behind it in late December 2019.

The largest crypto exchange in the US, Coinbase, recently reached a settlement regarding the lawsuit filed by the victims of a former crypto exchange, Cryptsy. The lawsuit was settled for $962,500 late in December 2019, and the funds will be transferred to an escrow account, and then distributed to the now-defunct exchange’s victims.

Those who have been a part of the crypto industry may remember that the crypto exchange Cryptsy filed for insolvency four years ago, in January 2016. The move came after a hacking attack during which the exchange lost 13,000 BTC and 300,000 LTC.

According to the exchange, around 10,000 BTC that were stolen during the attack belonged to its clients, Following the attack, the exchange’s clients attempted to withdraw their funds, and discovered that they are unable to do so, which led to a class-action lawsuit against the exchange’s founder, Paul Vernon.

Vernon was accused of unjust enrichment, negligence, conversion, as well as the violation of Florida’s Deceptive and Unfair Trade Practices Act. Furthermore, the plaintiffs proceeded to create a webpage, inviting the exchange’s other victims to step up and join their cause.

How did Coinbase get involved?

As mentioned, it was not Cryptsy who made the settlement, but Coinbase. The major US exchange entered the picture when the plaintiffs accused it of being involved in laundering the stolen money.

In fact, they also filed a followup complaint later that year, in December. The complaint accused Coinbase of helping the thieves get away with the stolen money, and laundering $8.2 million in crypto.

Coinbase has been trying to dismiss the lawsuit and settle through arbitration, however, the court denied its motion. The exchange finally managed to negotiate a settlement after three years, as the case was approaching the jury trial.

Of course, Coinbase is far from being the only crypto business to face a lawsuit in recent years. Ever since 2017, scammed investors were filing lawsuits against all kinds of entities, not to mention that the US SEC was spearheading a crackdown on crypto projects that were selling securities, or scamming unsuspecting crypto enthusiasts.

By Ali Raza
A journalist, with experience in web journalism and marketing. Ali holds a master's degree in finance and enjoys writing about cryptocurrencies and fintech. Ali’s work has been published on a number of cryptocurrency publications. Raza is the co-founder of 5Gist.com, too, a site dedicated to educating people on 5G technology.

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