Skip to Content

Crypto Hack Investors Deserve Their Day in Court

February 24, 2022 Blog

President Joe Biden is expected to issue an executive order on crypto assets as early as this week, according to reports.

The executive order reportedly will direct a wide range of government agencies to study cryptocurrency and the central bank digital currency (CBDC) to design a comprehensive strategy. Some of the agencies that will likely be asked to prepare a report include the Departments of Treasury, State, Justice and Homeland Security.

The Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission, the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency will also consider market protection measures.

The Problem for Crypto Investors

Our cryptocurrency attorneys know that a major issue that does not appear on the regulators’ radar screen is how crypto investors can recover their losses in the event of a hack that results in crypto being stolen from their accounts.

Last week Bloomberg reported on a hack at IRA Financial Trust (IRAF), which allegedly resulted in the theft of $36 million in cryptocurrency from as many as 500 IRA investor accounts. IRAF allows its customers to purchase crypto through a partnership with crypto exchange Gemini Trust Co. Both companies deny responsibility for the apparent security breach.

A major problem for investors trying to recover from IRAF and Gemini involves their contract disclaimers of liability and forced arbitration clauses. Gemini’s arbitration clause requires its customers to arbitrate at the JAMS arbitration service and bars investors from filing a class action or a group case. IRAF’s arbitration clause requires customers to arbitrate at the American Arbitration Association’s offices in South Dakota and provides that the “loser pays” the winner’s legal fees and expenses, which could be quite substantial.

The effect of these two arbitration clauses is to divide and conquer the hack victims.

The 500 innocent victims of the hack are apparently precluded from filing a class action case in court where all claims could be heard efficiently in one judicial proceeding.

Discuss Your Options with the Cryptocurrency Attorneys at Zamansky LLC

The regulators studying crypto must address investors’ recourse for theft of crypto, which is becoming more common. A good start would be to ban all pre-dispute arbitration clauses by crypto sellers and their digital asset partners. By doing so, crypto investors would have a right to their day in court and could seek recovery of their losses. Contact our investment fraud attorneys today for immediate assistance.


Client Reviews

“Jake Zamasky and his colleagues represented me in a FINRA arbitration case against a large multinational bank and succeeded in obtaining an award for the full amount of my investment losses. I would highly recommend the Zamansky firm for their experience in securities litigation, their level of detailed research and case preparation, and their ability to effectively fight for what’s right.”

Richard R.

“Throughout my entire case, Jake Zamansky was incredibly responsive and spent time walking me through each step of the process. He is professional and worked with my challenging schedule, even meeting with me nights and on weekends. He knew exactly which turn to take when it came to my case and yet was respectful of any decisions I wanted to make resulting in a positive outcome.”

Donald A.

“Jake Zamansky and his firm represented me in a FINRA arbitration case to recover investment losses. Jake and his team were very professional and worked very hard preparing for trial and then reaching a substantial settlement of our case. I would highly recommend them.”

William E.

“Jake Zamansky represented me in a FINRA arbitration case which allowed me to recover a substantial portion of investment losses. He is truly an expert in this space and I would highly recommend him to those investors who may have been been a victim of investment fraud.”

Chris K.

“Jake and his team did a great job communicating with me throughout the process of my lawsuit. I would recommend him to anyone looking to sue UBS for unethical practices.”

Mike A.
View More