Leading altcoin exchange Cryptsy is facing a lawsuit by Silver Law Group on behalf of customer Skye Bonow, who allegedly lost 140 BTC in January (then worth approx. $100k-$140k) due to a security breach of an undisclosed nature.
The law firm, which specializes in securities litigation, alleges that Cryptsy misleads clients about security risks. Bonow says he warned Cryptsy that he saw his funds being moved to other addresses still under Cryptsy control, but the exchange took no action to freeze them. Counsel David Silver analogizes Cryptsy’s handling of client funds in the following way:
“This is like the client walking into a bank on a Monday morning with a statement from the bank saying he has 150 BTC, and asking to withdraw that bitcoin, and the bank saying that someone took that money this morning and we have no responsibility for it.”
To be sure, the liability structure in a bank is markedly different. Legally, the bank has an outstanding of balances to their account holders, which are backed up by deposit insurance. Many crypto exchanges don’t expressly obligate themselves to such, although some have paid out of their own pocket in previous thefts.
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Cryptsy, on its blog, says it will “defend the case vigorously”, countering that the attack in question came from within the client’s own computer.
The Cryptsy case is being launched by Silver at the same time as his action against Bitcoin Savings & Trust, accused of being a Ponzi scheme. In total, “nearly $12 million in restitution from these online operators.” On his site, he advertises:
“If you have invested in Bitcoin or any other cryptocurrency and believe you are the victim of a fraud or a theft of your assets, you might have the grounds upon which to assert a claim to recover your losses. Additionally, if you have entrusted your cryptocurrency to Cryptsy or have traded through its web site and feel you have been misled, gather your metadata and contact Silver Law Group to find out what rights may be available to you.”
The suits continue a streak of legal action taking place in the bitcoin industry, the most recent round involving mining hardware manufacturer Butterfly Labs.