Vircurex Faces Legal Action
Vircurex, a cryptocurrency exchange platform, has been hit with a federal class action lawsuit. The lawsuit has been filed by Timothy Shaw, a Colorado resident and ex-customer of Vircurex. In his official complaint, Mr. Shaw claims that the crypto-exchange failed to honor the terms of the contract and engaged in “constructive fraud, and unjust enrichment”. Notably, the exchange’s contract clearly states that users may withdraw funds whenever they want. However, this does not appear to be true.
According to Shaw, $50 million worth of bitcoin and other cryptocurrencies were “frozen”. As a result, him and thousands of other Vircurex users could not access or take out their funds. The exchange has been hacked a number of times. So, when a large number of people began withdrawing their assets from the exchange, the company decided to stop the withdrawal process in order to hold on to their cash reserves. The company said it wanted to use these reserves to help it remain operational and return to a solid financial status.
Freezing of Assets
Vircurex froze all transactions using bitcoin, dogecoin, litecoin, terracoin, and feathercoin. Because of this, Mr. Shaw stated that he was unable to withdraw his bitcoins from the exchange. He also accused the company of making false and misleading claims while attempting to “cover their tracks” and ultimately disappear without leaving a “trace”. In addition, Mr. Shaw pointed out that customers of the exchange were told that it would be useless to take any legal action against the company.
The crypto-exchange also tried to make its customers believe that it was operating out of Belize. After a thorough investigation, a New York law firm (Levi & Korsinsky) could not find any links between Vircurex and Belize. They did, however, come across some information which suggested that the crypto-exchange had a connection with Beijing, China. There was even a direct quote from Andreas Eckert, the company’s founder, which referred to the company as a “German-owned family business”. To make matters even worse, the exchange is still active even though it has not settled many of its accounts.
Not the First Time
This is not the first time that a crypto-exchange has been sued. In mid 2017, the Quoine cryptocurrency exchange was sued. It was mainly accused of “fraudulently reversing” ETH to BTC trades trades. The number of lawsuits filed against crypto-related businesses and companies seems to be increasing. Fairly recently, BitConnect was slapped with an Emergency Cease and Desist Order, primarily because of lack of transparency and sufficient information regarding its business operations. It’s quite possible that these kinds of legal battles will require more and more lawyers who specialize in “cryptocurrency law”.