BC Court Ruling Exonerates Cryptocurrency Exchange
A recent ruling by a British Columbia court exonerated a cryptocurrency exchange from liability over a significant loss incurred by a user due to an online scam, despite the exchange having issued multiple warnings. Justice Lindsay LeBlanc of the BC Supreme Court stated in her judgment, released on Monday, that NDAX Canada, a Calgary-based platform, fulfilled its legal responsibilities by alerting the user, Yan Li Xu, four times about the potential for fraud connected to her transaction.
Details of the Case
Xu, an accountant from Victoria, found herself facing a staggering loss of C$671,000 (around US$480,000) after falling victim to an investment scheme that promised daily returns. This investment led her to remortgage her home and borrow funds from a friend, culminating in a large deposit to her NDAX account between April 11 and May 17, 2023, which she used to purchase Ethereum.
Warnings Issued by NDAX
The court revealed that on April 18, an NDAX employee reached out to Xu regarding her planned withdrawal, noting that her transaction raised multiple risk flags. Despite being cautioned that she might be targeted by scammers, Xu insisted on executing her withdrawal, even threatening legal action against the exchange should they not comply. Following her messages, NDAX escalated the warnings, providing detailed written risk disclosures and conducting follow-up calls, including one from compliance officer Julia Baranovskaya who expressly warned Xu of the scam risks involved.
Outcome of the Transaction
Ultimately, Xu proceeded with the transaction, resulting in her funds being transferred to a fraudulent wallet, leading to their complete loss. The court maintained that while the circumstances were unfortunate, NDAX Canada was not held accountable, as it had provided adequate warnings in an effort to protect its users.
Context of the Ruling
This legal decision comes in the wake of increased scrutiny within Canada’s cryptocurrency landscape, as the nation ramps up its regulatory enforcement on platforms failing to comply with anti-money laundering laws. Just days prior, Canada’s financial intelligence agency slapped a never-before-seen penalty of C$176.9 million on a Vancouver-based crypto company for neglecting to report numerous suspicious transactions, including those associated with serious crimes such as child exploitation and ransomware.
Currently, Decrypt has sought further comments from both the British Columbia court and NDAX Canada, in addition to attempting to contact Xu through her legal representatives.
