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Bitcoin-to-Gold Service Faces Class Action Over Alleged Fraud

Bitcoin-to-Gold Service Faces Class Action Over Alleged Fraud

Bitcoin-to-gold website Coinabul LLC is facing a serious federal class action alleging that it defrauded some of its clients.

The leading plaintiff is Yazan Hussein, who claims he transferred 1,644.54 BTC to Coinabul last year, but did not receive the gold he ordered.

The federal complaint was filed in Illinois on 25th July. It names Coinabul and its CEO Jason Shore as defendants. Hussein demands a jury trial.

Hussein turned to Edelson law for representation, the same firm heading the Mt. Gox class action in the US. Chris Dore, a partner at the firm, told CoinDesk that Hussein reached out to the company after trying to resolve the Coinabul dispute for close to a year.

Dore explains:

“Once we were contacted by our client, we looked into it and this problem [is] widespread. There are countless complaints of people having the same experience where suddenly they stopped responding and stopped sending any product in exchange for the bitcoins. We did file it as a punitive class action and we do intend to pursue it as a class.”

Dore added that Edelson wishes to pursue the complaint as a civil matter to ensure that all bitcoins involved in unfulfilled transactions are returned.

“The contracts that were entered into were simply not performed and [Coinabul] showed no ability or interest in performing those contracts,” he said. “What we want – and what we feel is best – is for all the bitcoins to be returned, and then everyone simply goes forward and that is the end of the case.”

Dore said Edelson has not been in touch with Coinabul yet.

No shipments since last June

The suit alleges that Coinabul stopped honouring its sales more than a year ago, back in June 2013. However, Coinabul continued to take orders and accept bitcoin payments for precious metals it did not have in stock, the plaintiffs claim.

The complaint describes the nature of the case as follows:

“Defendants run an online marketplace called ‘Coinabul’ where consumers may exchange ‘bitcoins’ – a new form of digital currency – for physical denominations of silver or gold. Unfortunately, rather than delivering the metals promised to their customers, defendants chose to capitalize on the lack of effective regulatory oversight in this burgeoning industry, and instead defrauded their customers out of millions of dollars worth of bitcoins.”

The plaintiffs claim Coinabul stopped shipping the promised gold or silver and thus unlawfully misappropriated millions of dollars worth of customers’ bitcoins.

Delays, excuses, more delays

The complaint states Coinabul unexpectedly stopped shipping precious metals to their customers approximately two years after it was founded in 2011. This caused a backlash, especially on bitcoin forums such as bitcointalk.org.

Coinabul responded to the controversy by taking part in online discussions and apologising for “longer-than-usual delays”.

The company went on to issue additional ambiguous statements in an attempt to alleviate customer concern over the unfulfilled orders. Then, in July 2013, Coinabul sent an email to customers claiming that it was unable to find a bank willing to take its business.

However, in the email Shore claimed that a “large portion of outstanding orders” had already received tracking numbers and were en route to customers.

The complaint alleges the company never stopped accepting bitcoins for new orders, although it had no intention of fulfilling them.

Hussein’s history with Coinabul

Hussein claims Coinabul still owes him 1,644.54 BTC. The unfulfilled orders were placed between 22nd-24th June last year.

Prior to these unfulfilled orders, Hussein spent approximately 1,400 BTC on gold coins and bars from the website. However, these shipments were fulfilled within several weeks.

Dore explained:

“The long and the short of it is that he last year did some successful business with Coinabul where he transferred bitcoins and they gave him precious metals. He tried to do it again and transferred the bitcoins over and nothing came back. Time passed and time passed.”

After noticing that his last two orders were not fulfilled in a reasonable timeframe, Hussein began contacting Coinabul in July 2013.

Following an email exchange he decided to ask for his money back on 4th September. However, Coinabul informed Hussein that he was at “the mercy of the banks” and that the company could not fulfil any orders.

Over the next few months Hussein said he merely got vague excuses for why his orders were not shipped. Eventually he decided to take legal action.

Crucially, the complaint states that the exact number of class members is unknown to the plaintiff, but it points out that Coinabul received “over a thousand” orders. It is unclear how many of these remain unfulfilled.

“We have been contacted by other people, so it’s definitely not isolated,” said Dore. “I can’t really say [how large the class is]. It’s not gigantic, if I had to guess, I would say it’s in the thousands.”

Read the court document in full below: 

HUSSEIN-et-al-v-Coinabul-1-14-cv-05735

From: CoinDesk

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该日志由 bitman 于2014年08月01日发表在 百家 分类下, 你可以发表评论,并在保留原文地址及作者的情况下引用到你的网站或博客。
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