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Class Action Lawsuit Filed Against Cryptsy

Reading Time: 2 minutes by on January 15, 2016 Finance, News
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Following reports that customers have been unable to access their accounts, Silver Law Group has filed a class action lawsuit against the Bitcoin exchange Cryptsy and Paul Vernon. Over the past few months, users have complained they were unable to protect their assets and withdraw their holdings. Despite repeated inquiries to Cryptsy, their customers had not received any meaningful response or information until January 14, 2016, when Cryptsy posted an announcement on their blog.

Cryptsy opened for business in May 2013 offering a platform for users to trade various cryptocurrencies, and their website claims to have more than 270,000 customers. Their blog also alludes to a hack in July 2014 which they claim has lost them roughly 13,000 BTC in addition to 300,000 LTC. The creator of an altcoin known as Lucky7Coin has been identified as a possible culprit. Cryptsy has offered a bounty of 1,000 BTC to anyone who can find the hacker responsible and return the funds.

Cryptsy also explains why the authorities were not informed, saying that the exchange was unsure who exactly to contact. The Miami FBI was contacted but they re-directed the exchange to report the incident on the I3C website, which they have not had a response from as of yet.

Going forward, the firm has three options: first, declare bankruptcy and allow the courts to deal with disbursements; second, allow someone else to buy out and run Cryptsy and provide liquidity to allow withdrawals; and finally, should the stolen funds somehow be returned, then the ban on withdrawals would be lifted and Cryptsy would move forward.

Previously the firm attributed withdrawal problems to technical issues and the suspension of trading to customer phishing attacks. The lawsuit was filed by a Cryptsy customer based in Virginia and reckons that more than $5 million of digital funds are being withheld. According to  the Silver Law Group along with the law firm of Wites & Kapetan, PA:

“All Cryptsy account owners who deposited Bitcoins, alternative cryptocurrencies, or any other form of monies or currency at Cryptsy and have been denied access to their accounts and funds between November 1, 2015 and the present date.”

The lawsuit claims that the Florida-based exchange has committed negligence, unjust enrichment, conversion of funds and property, and violations of Florida’s Deceptive and Unfair Trading Act.

People who have lost their cryptocurrency through using Cryptsy may have grounds to recover their losses. The lawsuit is currently pending in the United States District Court for the Southern District of Florida, where the case number is 9:16-cv-80600. The exchange is reportedly still making market trades but all withdrawals still remain unavailable. More details of the lawsuit can be found here.

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