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Coinbase offers nearly $1 million settlement to Cryptsy victims following class action lawsuit

Yilun Cheng

Coinbase agreed last year to offer a $962,500 settlement to former customers of the now-defunct crypto exchange Cryptsy for allegedly failing to stop the laundering of stolen coins, according to a CoinDesk report.

Cryptsy first claimed insolvency in Jan. 2016 following a supposed hacking incident of approximately 13,000 bitcoin and 300,000 litecoin. According to an official blog post published back then, now inaccessible, the exchange still owed around 10,000 bitcoin to account holders. 

Customers – who accused the exchange of fraud in the wake of its collapse after months of funds withdrawal issues – responded with a class action lawsuit against Cryptsy founder Paul Vernon over his alleged negligence, unjust enrichment, conversion, and violation of Florida’s Deceptive and Unfair Trade Practices Act, CoinDesk previously reported. 

Cryptsy victims then alleged that the supposedly hacked coins were in fact stolen by Vernon and laundered through Coinbase. In Dec. 2016, they filed a followup complaint accusing Coinbase of abetting the theft of around around $8.2 million worth of cryptocurrency. 

The exchange tried to suspend the case and settle the dispute through arbitration, but the motion was denied by U.S. District Judge Kenneth Marra. After Coinbase unsuccessfully filed an appeal to Marra’s decision, the lawsuit was close to seeing a jury trial. 

However, in late 2019, Coinbase agreed to pay Cryptsy victims $952,500 in settlement, attempting to conclude the prolonged legal battle, according court documents dated Nov. 27 and Dec. 10. The settlement is expected to be either approved or modified during a hearing scheduled on April 17, 2020.

David Silver, one of the plaintiff’s attorneys, applauded Coinbase for “stepping up and resolving” the case, CoinDesk reported.