Chicago Business Litigation Lawyer Blog
Bitcoin has been all the talk by way of investors and the question arose this week when prices dropped as to the legality of a Bitcoin exchange shutting down when prices were falling. It is alleged that trade halts were made for a period of two hours. The price drop was rather substantial from $20,000 to $11,000. It is said that the outage was for reason of technical difficulties and not intended to rescue the currency from free-falling, as the legality of doing that would be questionable. In fact, it is illegal for trading to be put to halt without following the Securities and Exchange Commission’s guidelines. Foreign currency exchanges are less regulated, and the for such reasons there are increased risks for loss, malfunctioning trading systems, and fraud.
Some even speculate that Bitcoin exchanges may stop completely if much fraud, technical difficulty, glitches or hackers and/or malware become common. Legal precedent set in this area of law is rare, though civil litigation in this area has started. The stoppage has certainly started lawsuits claiming damages. Mt. Gox, a bitcoin exchange in Tokyo, collapsed after it halted withdrawals and eventually conceded that its holdings, worth approximately $65 million at the time, had been stolen by hackers.
The site also came under great scrutiny for possible “insider trading” among its employees before the site started to support Bitcoin Cash, a fork of the Bitcoin project. CEO Brian Armstrong pledged that the company will investigate those allegations internally.
In a previous decision in around late August, a federal judge ordered the return of 11,000 bitcoins worth about $30 million in a decision considered the first of its kind. The ruling stemmed from a class action in which plaintiffs alleged that the defendant had stolen their money and fled to China. The judgment highlights the decentralized nature of bitcoin, with no person or authority in charge. It makes it difficult for winning plaintiffs to get their bitcoins that they are entitled to back.
Also, sporting heroes such as Darren McFadden from the Dallas Cowboys have lost out on multi-million dollars due to fraudulent investing at the hands of his business manager. His manager is being sued for mishandling monies appropriated whereby $3 million dollars in investment would have become $237 million. Varies monies were mishandled by his manager and Bitcoin investments are under scrutiny as part of that suit. At the time of suit, one bitcoin cost an investor $800.
In other Bitcoin-related suits, Newsweek may be sued for alleging an incorrect creator of the cryptocurrency. The article hurt the family by harm in terms of other prospects for employment and the family has been subject to harassment with persons reading the article showing up at the family’s doorsteps. The title of the article had labeled him as “the Face of Bitcoin.” The victim indicates that, as such, they felt that they were portrayed in a “false light.” Being portrayed in such a way can lead people to conclusions that may not be correct. Consequently, it has been construed as false reporting. It may be a difficult suit to bring forward, as the media and the public are entitled to have full knowledge of matters that concern public interest; there are extensive free speech protections granted to the press and according to the First Amendment of the Constitution.
For reasons above, the navigating of cryptocurrency litigation could become the most cryptic of them all including the enforcement of the debt owed.
https://theoutline.com/post/2779/coinbase-bitcoin-trades-shut-down-price-cryptocurrency-exchanges
http://dfw.cbslocal.com/2017/12/21/cowboy-bitcoin-fortune-lawsuit/
http://money.cnn.com/2014/10/14/technology/nakamoto-newsweek-bitcoin/index.html
https://news.bitcoin.com/class-action-lawsuit-exchange-kraken/
https://www.law.com/dailybusinessreview/almID/1202794478802/
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