Bitcoin trading platform sued by members for $460,000

Filed Under: Law & order

Bitcoin currency collapse - where next for digital cash?Four ex-Bitcoin users are suing the coin exchange for $460,000 USD, accusing the now frozen Bitcoin trading platform Bitcoinica for breach of contract and negligence.

In 2009, an open-source, peer-to-peer digital cash system launched. Cutely called Bitcoin, it was based on a paper [PDF] entitled "Bitcoin: A Peer-to-Peer Electronic Cash System".

Earlier this year, Bitcoinica suffered two malware attacks where over 60,000 Bitcoins were stolen. In terms of real monetary values, Bitcoin fluctuates wildly, but it is currently guesstimated at around $10 per Bitcoin unit.

After these attacks, Bitcoinica was taken offline, and it still hasn't returned.

Its homepage states:

We apologize for this incident and the inconveniences it has caused. The incident happened during a transition period, which was initiated to bring Bitcoinica up to a professional level of security. Bitcoinica will not continue operations until the transitional process been completed.

According to The Verge, Bitcoinica announced that users would be refunded 50 percent of their deposits.

That was certainly not good enough for the four ex-members, and they raised a formal complaint.

bitcoins

The complaint [PDF], filed on 6 August, states the plaintiffs want recompense for the following:

  • the return of all monies in the accounts of Plaintiffs;
  • for all other general, special, incidental and consequential damages;
  • attorneys' fees, as alleged in the causes of action;
  • exemplary and punitive damages;
  • prejudgement and post-judgement interest, to the full extent permitted by law;
  • costs of suits incurred by Plaintiffs; and (my favourite)
  • such other and further relief as the Court may deem just and proper.

As ArsTechica points out, this filing in in California, so it will certainly be interesting to learn whether the court has any jurisdiction over Bitcoinica, a UK-based Bitcoin trading company.

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3 Responses to Bitcoin trading platform sued by members for $460,000

  1. Nigel · 736 days ago

    Good luck to the plaintiffs. It sucks that Bitcoin has kept half of their deposited funds. It remains to be seen how they're going to get around the jurisdiction issue, filing their complaint in California against a defendant based in the U.K. But of all the states in which they could have filed such litigation, California is probably the one most hostile to their hope of being compensated for attorney fees, which are likely (by far) to constitute the biggest share of their expenses.

    Unless the Bitcoin user agreement explicitly granted compensation for attorney fees to the winner in any contract dispute, it'll be a cold day in hell before any California court awards attorney fees to the plaintiffs, even if they win on the causes of action.

    It's part of the legitimized racket that trial lawyers have set up for themselves in California. Unless the contract specifies otherwise, the "law" provides the winner in a civil dispute only with compensation for "court costs", meaning court filing fees, which in a protracted litigation usually amount to a tiny percentage of the associated attorney fees. It's not a system wherein the winner wins and the loser pays. Rather, it's a system wherein the lawyers win and everyone else pays. This is a long-standing injustice, for which California has become notorious.

    • Robert · 735 days ago

      Thanks for the info Nigel, interesting, is it very different in the rest of the US then? Is there many other states where " the winner wins and the loser pays"?

      // Robert

  2. Tim · 735 days ago

    It's important to maintain the distinction between Bitcoin, and Bitcoinia. Bitcoin is the currency, and Bitcoinia is a trading platform in the same vein as other money markets, where people buy and sell currency on speculation as in other trading markets (stock markets for example).

    Hopefully this will further point out to the markets which trade in Bitcoin that simply because it is a nascent currency, that they need to take all of the same steps as any with any other. Saying that these are "growing pains" is simply not acceptable, especially if Bitcoin is to continue growth, and adoption.

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About the author

Hi. I am a social, brand and communications expert with 10 years in senior roles in the tech space. I'm currently Sophos' s Global Director of Social Media and Communities. Proudest work achievement? Creating and launching award-winning Naked Security. Outside work, I am a mean cook, an avid reader, a chronic insomniac, a podcast obsessive and blogger .