As cryptocurrency hacks and thefts continue with perpetrators that can be incredibly difficult to track down, some investors are bringing lawsuits against third parties in an effort to recover stolen funds. In one such case, Sultan v. Coinbase, Inc., 18-cv-934 (E.D.N.Y.), Sultan, a Coinbase user, called what he thought was the customer service support line at Coinbase regarding his account. In fact, he was speaking with a hacker who used the personal information disclosed during the call to steal digital currency worth more than $200,000. Sultan then brought suit, alleging Coinbase was negligent in protecting his account.
In response to the lawsuit, Coinbase moved to compel the case to arbitration, arguing that Sultan manifested agreement to the mandatory arbitration provision in the Coinbase user agreement by clicking "I agree to the User Agreement" when creating his account. On January 24, 2019, the court granted the motion to compel. See Sultan, 2019 WL 319391. Applying recent precedents involving Uber (Meyer v. Uber Technologies, Inc., 868 F.3d 66 (2d Cir. 2017) and Amazon (Nicosia v. Amazon, Inc., 834 F.3d 220 (2d Cir. 2016)), the Court agreed with Coinbase that Sultan was on inquiry notice of the terms of the user agreement. The "Create Account" button could not be activated without checking the "I Agree" box situated directly above the "Create Account" button. Sultan's declaration that he did not remember seeing or clicking the verification box was not sufficient to rebut Coinbase's evidence of assent.
Applying cases involving new economy companies like Amazon and Uber to the even newer field of blockchain and cryptocurrency could have positive results for an industry hoping to take off just like Amazon and Uber did. This kind of precedent could start bringing the legal certainty needed by the crypto industry to enable it to expand and innovate. Meanwhile, plaintiffs can seek quicker, less expensive results in arbitration.
Blockchain technology utilizes a distributed digital ledger to record and track information, and can be leveraged to gain transparency and certainty in transactions ranging from cryptocurrency to supply chain tracking. This blog provides information on the legal developments surrounding implementation of blockchain technology, with an initial focus on the financial services sector.