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.