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A group of customers who filed a lawsuit against Coinbase is now withholding their account information, shutting down efforts to move the case to arbitration.
The class action lawsuit concerned alleged cybersecurity failures on the part of Coinbase and seeks to compensate customers who allegedly had their accounts breached and “incurred losses arising from the unauthorized transfer of assets.”
In the filing, the plaintiff alleged he had $6,000 of cryptocurrency drained from his wallet to an address he had never interacted with before. It adds that Coinbase allowed the hackers who breached his account to withdraw $1,000 from his bank account.
After contacting his bank, the transaction was reversed, but Coinbase then locked his account, labeling it with a negative account balance. The crypto firm later retrieved the $1,000 that the hackers stole from the plaintiff.
The lawsuit, filed in the U.S. District Court for the Northern District of Georgia, alleges that “contrary to its representations,” Coinbase does not use “standard practices” to protect its users' accounts.
In addition, the lawsuit claims that Coinbase “improperly and unreasonably” stops consumers from accessing their accounts and funds, either for extended periods of time or permanently.
The lawsuit also pokes holes in Coinbase’s dispute resolution process, pointing to “cumbersome conditions” that must be met before arbitration can be reached, claiming it “systematically fails” to honor the promises of its User Agreement regarding dispute resolution.
Though handling legal disputes by arbitration can be cheaper than using federal courts, there is also a significantly lower level of transparency as well as different standards for evidence.
Coinbase in court
Coinbase has attempted to keep multiple cases out of federal courts in recent months with limited degrees of success.
Earlier this month, the U.S. Appeals Court decided that Coinbase could not force customers impacted by the Dogecoin sweepstakes run by the exchange to seek private arbitration.
The incident concerns a June 2021 promotion that offered users the chance to win $1.2 million in the canine meme coin.
The news comes as Coinbase stock hit another all-time low this week, hitting just $32.40 per share earlier this week, a roughly 90% decline from its all-time peak.