But Noncustomer Plaintiffs May Face Uphill Battle Proving Digital Currency Exchange’s Actual Liability
Earlier this week, the Eleventh Circuit affirmed, in an unpublished opinion, that Coinbase Inc., an online platform used for buying, selling, transferring, and storing digital currency, could not compel arbitration on a former customer of Cryptsy, a now-defunct cryptocurrency exchange, in his proposed class action suit alleging that Coinbase helped to launder $8 million of Cryptsy customers’ assets. Leidel v. Coinbase, Inc., Dkt. 17-12728.
In so holding, the Court found that the plaintiff’s allegations emanated not from the User Agreement between Coinbase and Cryptsy’s CEO, Paul Vernon, but from extra-contractual duties “allegedly” found in federal statutes and regulations, specifically the Bank Secrecy Act (“BSA”). As we previously have blogged, courts have held that financial institutions generally do not owe a duty of care to a noncustomer and that no special duty of care arises from the duties and obligations set forth in the BSA absent a special relationship or contractual relationship. Moreover, there is no private right of action stemming from the BSA. Nor does the BSA define a financial institution’s standard of care for the purposes of a negligence claim.
Coinbase is registered as a Money Services Business with FinCEN, and is otherwise required to comply with the BSA. However, if courts treat Coinbase as it would any other financial institution (which we have no reason to believe that they would not), Plaintiff, having avoided the contractual arbitration provision, has an uphill battle to show that Coinbase had a duty of care to noncustomers to prevent AML failures. Continue Reading Coinbase Cannot Force Noncustomers to Arbitrate Suit Alleging Violations of BSA/AML Duties