Cryptocurrency trading platforms Xapo and Indodax have been hit with a massive lawsuit that accuses the exchanges of harboring stolen digital funds.
Xapo and Indodax Are Headed to Court
According to court documents, both companies failed to employ anti-money laundering and know your customer (KYC) protocols to ensure that the money they were being asked to store came from reputable sources. In addition, it appears the companies did not bother to perform background checks on the account holders in question. At the time of writing, it is estimated that both Xapo and Indodax are storing as much as 500 bitcoins which were taken from a German man named Dennis Nowak.
The lawsuit filing explains:
On or about November 20, 2018, the plaintiff deposited into his USA exchange account 500 bitcoin (500 BTC) in three separate deposits: (1) a 200 BTC deposit, (2) a second 200 BTC deposit, and (3) a 100 BTC deposit.
It is alleged that Xapo holds as much as 19.99 BTC of the stolen funds, while Indodax holds as much as 479.69 BTC, though it has not been specified at press time where the funds initially came from. The hackers have not been identified by court documents, while the exchanges originally used to hide the stolen funds have not been deciphered. However, the filing does say that Nowak stored his bitcoin stash with a “Northern California-based exchange.”
This could range from Coinbase to Kraken, as San Francisco – based in Northern California – appears to be the place where many U.S.-based cryptocurrency exchanges and trading platforms have set up their offices. While not identified for the time being, we could potentially see another exchange added to the list of defendants in the future for not maintaining strong anti-theft protocols.
The plaintiff explains that Xapo and Indodax knew their KYC protocols were weak but chose to leave them as they were. He is now accusing both companies of “aiding and abetting” the hackers. He also states that the companies failed to comply with federal laws by allowing the thieves to utilize the services offered by both platforms.
The filing explains:
Xapo and Indodax each know or should have known that the assets stolen from Plaintiff and stored within their custody were indeed stolen. However, Xapo and Indodax have undertaken no efforts to return those stolen assets to Plaintiff.
This Is Happening All the Time
Nowak says he is seeking the return of his “personal property” – in other words, his bitcoin stash – while pursuing additional relief. In all, Nowak is looking to cash in on more than $2 million from the lawsuit.
It seems like court action is being taken from all angles in the crypto space as of late, with another lawsuit being filed against companies such as Bittrex and Poloniex, both of whom are accused of aiding Tether in the alleged bitcoin manipulation of 2017 that saw the currency reach its all-time high of nearly $20,000.