Cryptocurrency Theft Lawsuits Diminish amid Rise in Cybercrime
In the aftermath of digital heists, legal relief remains scarce for victims suing cryptocurrency platforms and mobile service providers accused of inadequately safeguarding users’ assets, including crypto wallets and phone numbers.
Despite rising cybercrime, complaints blaming crypto theft on lax company security fell to a mere 11 cases in 2023 after peaking at 20 new cases a year earlier, according to an analysis of Bloomberg Law’s docket data. The primary reason for victims’ inability to find relief in court is private arbitration provisions saving the largest cryptocurrency exchanges and mobile providers from litigation, dockets show.
Arbitration and other contractual protections like liability caps are shielding these popular targets of crypto theft hacks—cryptocurrency exchanges including Coinbase Global Inc. and some of the country’s largest cellular operators —from costly legal decisions. Plaintiffs’ failure to gain traction with crypto-theft lawsuits points to a concerted and successful legal strategy adopted by the cryptocurrency industry in response to an onslaught of hacks and lawsuits in prior years, said Scott Wortman, a partner specializing in financial services defense litigation at Blank Rome LLP.
“We’re seeing a lot more legal sophistication amongst the cryptocurrency industry, and we typically see that with new and emerging technologies,” Wortman said. “The other aspect besides enforcing arbitration is putting caps on liability,” because until a few years ago crypto companies hadn’t established contractual protections “that were sophisticated enough to enforce.”
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"Cryptocurrency Theft Lawsuits Diminish amid Rise in Cybercrime," by Skye Witley was published in Bloomberg Law on February 16, 2024.