A proposed class action looks to represent consumers whose Coinbase “wallets” or accounts have allegedly been frozen by the nation’s largest cryptocurrency exchange or hacked by third parties.
According to the 26-page complaint, Coinbase, contrary to its promise to afford customers a secure platform through which to buy, store and transact crypto assets, “improperly and unreasonably” locks out users, blocking them from accessing their accounts and funds, “either for extended periods of time or permanently.”
This is incredibly problematic as far as cryptocurrencies are concerned due to their extreme volatility, meaning a customer’s inability to access their account in a timely manner might cause severe financial losses, the case, filed in California on August 3, stresses. Making matters worse, the lawsuit says, is that Coinbase, reportedly boasting more than 56 million users across 100 countries and more than $335 billion in crypto assets, fails to timely respond to customer support inquiries and preserve and safeguard users’ funds as promised.
Overall, the filing alleges Coinbase has fallen far short of its assurance to allow customers full control over their cryptocurrencies.
“As a result of Coinbase’s conduct, Plaintiffs and Class Members have been damaged through the loss of their wallet and account access, the funds and investments in those accounts and, among other things, their investment opportunities,” the suit alleges.
Per the lawsuit, Coinbase holds itself out as “the easiest place to buy and sell cryptocurrency” and “[t]he most trusted cryptocurrency platform.” The company also represents that customers are able to be in full control of their assets, and that its wallet, i.e., an account that reflects how much in assets and funds a user has, is the easiest, safest solution as far as buying, selling and sending crypto, the case says.
The plaintiffs, Coinbase users from Texas and Florida, allege that they signed on with the company with the reasonable expectation that they would be able to access their crypto wallets whenever they wanted. The plaintiffs claim, however, that they were each locked out of their accounts, which held total values of Bitcoin and/or Ethereum of around $18,000 and $8,000, respectively, and had their crypto assets frozen by Coinbase, with requests to address the problem going unresolved.
Tackling the defendant’s mandatory arbitration provision, the suit notes that although Coinbase’s User Agreement, which customers must agree to upon creating an account, contains an arbitration clause, the company “systematically fails to follow its own mandated pre-arbitration dispute resolution and arbitration procedures,” thereby rendering the provision void as to the allegations in the proposed class action. The suit alleges Coinbase, upon information and belief, knew or should have known that it did not have adequate staffing or policies and procedures in place to follow its own pre-arbitration dispute resolution provision.
“Accordingly, Coinbase misrepresented its ability to comply with its own arbitration procedures, fraudulently induced Plaintiffs and Class Members to accept the User agreement with the Arbitration Provision, breached their duties under the Arbitration provision, and rendered Plaintiffs’ and Class Members’ acceptance of it a mistake of fact, if not rendering the Arbitration provision void ab initio,” the lawsuit contends.
The suit looks to represent a proposed class that covers all current and former Coinbase account users and/or consumers in the U.S. who registered for a Coinbase account at any time on or after the day four years prior to the date on which the lawsuit was filed (August 3, 2021), who maintained funds and/or cryptocurrency in their account and who were subsequently deprived of access to, or lost, their funds and/or crypto due to the company’s conduct.
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