Florida Legal Team That Settled The First Ever Cryptocurrency Class Action Lawsuit
With the rise in popularity of cryptocurrency came cryptocurrency litigation, as the nascent form of currency unfortunately brought with it the same business disputes that surround all forms of monetary transactions and investments.
Class Action lawyers Marc Wites (Wites Law) and David Silver (Silver Miller) — along with Silver Miller partner Jason Miller — filed several of the first known cryptocurrency class action lawsuits in the country, and their efforts resulted in both the first-ever class certification in a cryptocurrency lawsuit and the first-ever cryptocurrency class action settlement against the now-defunct cryptocurrency exchange Cryptsy.
Wites Law and Silver Miller have teamed up again to bring and now settle the second known cryptocurrency class action this time against San Francisco, California-based cryptocurrency exchange Coinbase, in an action that followed and is related to the Cryptsy case.
Class Action Lawsuit Against Cryptocurrency Exchange Cryptsy
In late-2015, the Delray Beach, Florida-based cryptocurrency exchange Cryptsy abruptly shut down. The company’s founder, Paul Vernon, fled to China soon thereafter when it was discovered that he had been stealing Cryptsy account holders’ stored assets and converting the cryptocurrency into U.S. Dollars through Cryptsy’s and Vernon’s accounts at Coinbase.
Image: Cryptsy CEO Paul Vernon
On his way out of town, Vernon destroyed all of the data on Cryptsy’s servers and failed to respond to the class-action lawsuit filed against him and Cryptsy on behalf of Cryptsy account holders by Wites Law and Silver Miller. The lawsuit named as defendants Vernon, Vernon’s ex-wife, Cryptsy, and a major stakeholder in Cryptsy’s business operation.
With the help of Court-appointed receiver James Sallah, Wites Law and Silver Miller obtained certification of a class the Cryptsy account holders and were able to amass approximately $1,500,000 in assets to fund a class action settlement. The Cryptsy Settlement equated to a recovery of about 35% for each class member who submitted a valid claim.
They also obtained for the Cryptsy Class a judgment against Vernon, in his individual capacity, for 11,325 bitcoin, which is valued today at approximately $90,000,000, with bitcoin trading at approximately $8,000 per bitcoin.
Soon after the Cryptsy case was resolved, Wites Law and Silver Miller filed a class action lawsuit against Coinbase, based on information suggesting Coinbase knew or should have known that Vernon and Cryptsy were converting and liquidating through their Coinbase accounts the funds stolen from the Cryptsy account holders and, that in so doing, Coinbase aided and abetted Vernon’s and Cryptsy’s theft and fraud.
The Coinbase litigation was hard-fought.
Coinbase first demanded that the Court send the case to private arbitration. United States District Court Judge Kenneth Marra denied Coinbase’s request — a decision that was affirmed on appeal by the Eleventh Circuit Court of Appeals. See Leidel v. Coinbase, Inc., 729 Fed.Appx. 883 (11th Cir. 2018).
The parties then conducted extensive discovery in the action during a period of more than a year, including exchanging and reviewing more than 125,000 pages of documents, taking 16 depositions in various locations across the country, and producing and exchanging expert witness reports. The parties also engaged in substantial motion practice in the lawsuit covering a wide variety of subjects, including the propriety of document production, class certification, and summary judgment.
The parties attended mediation before The Honorable Howard Tescher (Retired), who had also mediated the Cryptsy settlement. After a full day of mediation and weeks of subsequent negotiations, Coinbase agreed to a class action settlement that brings another $962,500 to the Cryptsy victims. Wites Law and Silver Miller expect this additional funding to increase the recovery of class members to over 50% of their losses.
Judge Marra has preliminarily approved the settlement. A settlement website was just launched – https://coinbasesettlement.com/ – and class members will receive notice via email, mail, and internet advertising. The deadline to make claims, which can be submitted online or via mail, is April 13, 2020.
Notably, class members who made valid claims in the Cryptsy settlement need not make a claim in the new Coinbase settlement. Pursuant to the settlement with Coinbase, such previously-vetted claims will be deemed valid; those interest holders will be paid an appropriate share from the newly-recovered funds subject to the Court’s final approval of the settlement.
Attorney Marc Wites expressed that he is proud of the effort of all of the lawyers that contributed to the Cryptsy and Coinbase settlements. As Wites explained: “These were difficult cases, both on the merits and issues of collectability. When companies go out of business, founders flee the country, and the amount at issue is relatively small, most plaintiff law firms would decline to pursue the case. We were the only lawyers in the country to pursue a case against Cryptsy or Coinbase, individually or as a class action; and we were able to obtain multiple meaningful recoveries for victims who would have otherwise been left without any recourse.”