Silver Law Company Accused Cryptsy of Fraudulent Business Practices

Cryptsy faced a lawsuit from US law company that accused the bitcoin exhcnage of withholding information on security risks and fund management methods.

Florida-based Silver Law Company, on behalf of its client, Skye Bonow, accuses Cryptsy of exaggerating its security protocols and blames the exchange for Bonow's loss of 140 BTC. Photo: Cryptsy

Florida-based Silver Law Company, on behalf of its client, Skye Bonow, accuses Cryptsy of exaggerating its security protocols and blames the exchange for Bonow's loss of 140 BTC. Photo: Cryptsy

Florida-based Silver Law Company has filed a lawsuit against bitcoin exchange Cryptsy for allegedly using illegal business methods and irresponsible security measures.

In court documents, submitted in the 15th Judicial Court of Florida on October 23rd, Silver Law Company accused Cryptsy of breaking the Deceptive and Unfair Trade Practices Act. According to claims, the exchange failed to provide details about safety threats and client fund administration protocols.

Cryptsy investors noted their accounts were emptied and bitcoin funds disappeared. Complainant Skye Bonow, one of the exchange’s users, had lost 140 BTC in January because of safety and security violation due to unknown problems. Cryptsy then made an official announcement denying the charges.

Counsel David Silver blamed Cryptsy for improper funds administration. He said: “This is like the client walking into a bank on a Monday morning with a statement from the bank saying he has 150 BTC, and asking to withdraw that bitcoin, and the bank saying that someone took that money this morning and we have no responsibility for it.”

According to the suit, businesses are obliged by the Florida law to protect their customers and provide data on the potential threats and risks of utilizing the service.

The court documents stated that Cryptsy withheld information about safety risks and how the funds were stored. The exchange has also failed to give details about third parties that were involved with the exchange service.

The suit reads: “As a result of Defendants’ deceptive trade practices, Plaintiff was deceived into transferring bitcoin to Defendants, deceived into believing that Plaintiff’s assets were safe; and deceived into maintaining assets with Defendants when Plaintiff would have otherwise been able to protect and preserve his assets – thus causing significant economic damage to Plaintiff.”

Cryptsy said in an official announcement that it is going to challenge the charges and added that Bonow’s computer was attacked by hackers and the company could do nothing to return the funds.

Cryptsy CEO Paul Vernon wrote in the firm’s blog: “The complaint alleges that Cryptsy misled users and was negligent in security. They represent a single user. We have reviewed the unofficial complaint and believe that it is without merit. We intend to defend the case vigorously.”

The blog also enlisted actions the customers should take before using the platform in order to avoid similar problems. Among these actions is the use of two-factor authentication. Under the terms of agreement, all disputes are to be settled through arbitration.

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