Popular cryptocurrency exchange Coinbase has settled a long-standing class-action suit today, after it paid its accusers almost $1 million in restitution fees.
The suit in question was brought by customers of Cryptsy, a crypto exchange that has now gone bankrupt. The exchange suddenly collapsed in 2016, after claims that it had been hacked and drained of all its funds.
Three years ago, however, Brandon Leidel, the designated class representative in the suit, brought the case to life after alleging that Paul Vernon, the chief executive of the exchange, had used it to launder about $8.2 million in customer funds between 2014 and 2016. Adjusted for price changes today, the amount of money laundered is expected to be almost $100 million.
Coinbase Was Complicit in Fraud and Money Laundering
The case was eventually litigated by Silver Miller, a law firm based out of Coral Springs, Florida, and Toronto-based firm Wites. At the time, both law firms explained that Vernon had used his Coinbase account to convert the stolen funds from crypto to fiat, shortly before he fled the country. They added that due to this, the San Francisco-based exchange was negligent in ensuring oversight of customer accounts.
“Plaintiffs seek damages based upon the unlawful conduct of COINBASE in failing to properly monitor customer accounts that held investors’ money and ignoring its duty to investigate suspicious activities under U.S. anti-money laundering rules,” the lawsuit read in part at the time.
Although there was a standoff between Coinbase and the plaintiffs for a while, things got a big serious in 2018, when the Eleventh Circuit Court of Appeals ruled that the case against the exchange would be tried in open court.
Progress in Exchanges’ Operations
Now, court documents dated November 27 and December 10, 2019, have confirmed that Coinbase is making the proper payments to put the case to bed. The total payments amount to about $963,000, and it will be joining the 11,325 BTC won by plaintiffs in a previous case. However, a hearing is still expected to be conducted on April 17, which will help determine whether or not the preliminary agreement between both parties is sufficient.
David Silver, the co-founder of Silver Miller, commended Coinbase for taking responsibility and putting the case to bed, while adding that the outcome shows how early exchanges operated in an unregulated market and shunned regulations and laws as they worked.
He added, “This case shows that businesses in the cryptosphere bear a large measure of responsibility, from with whom they decide to do business and with whom they choose to associate.”