A British Columbia court has ruled that a cryptocurrency exchange was not at fault for a customer’s loss of C$671,000 (US$480,000) to an online scam, despite repeated fraud warnings.
in writing judgement In a statement released Monday, BC Supreme Court Justice Lindsay LeBlanc dismissed a claim brought by Victoria resident Yang Li Hsu against Calgary-based cryptocurrency exchange NDAX Canada, finding that the platform had met its obligations after warning the company four times that it might be being scammed.
While Mr. Schuh’s loss was “unfortunate,” Judge LeBlanc said NDAX Canada was “determined to have no liability”, noting that it is registered as a money services business with the Financial Transactions and Reporting Analysis Center of Canada (FINTRAC).
Judge LeBlanc added that the cryptocurrency exchange’s warning to Mr. Xu “could not be more clear.”
According to court facts, Mr Hsu, who works as an accountant in Victoria, opened an NDAX account on April 10, 2023, after an online acquaintance persuaded him to invest in a scheme that promised returns of up to 1% per day.
To fund the investment, she mortgaged her home, borrowed money from a friend, deposited C$671,000 into her account between April 11, 2023, and May 17, 2023, and used that money to purchase Ethereum.
On April 18, 2017, an NDAX employee contacted Mr. Xu to request further information about the withdrawal, warning that “there were elements of risk in this transaction” and that it would be escalated for review.
The call was recorded and later mentioned in court. The details of the Ethereum transaction were not disclosed in the judgment.
According to the ruling, after the call, Xu sent several emails asking NDAX to “proceed with the withdrawal without delay.” Mr. Xu’s tone then became more insistent, warning that if the company did not comply, he could take legal action.
When Mr. Xu tried to transfer cryptocurrencies to an external wallet, NDAX issued a series of gradual warnings.
The cryptocurrency exchange provided a written risk disclosure, a second confirmation notice, and two follow-up phone calls, one of which included an explicit warning from compliance officer Julia Baranovskaya that they were “likely to have been scammed.”
NDAX then processed her instructions and the Ethereum amount was transferred to the fraudster’s wallet and lost.
Xu’s lawsuit comes as Canada ramps up its crackdown on cryptocurrency-related compliance violations.
Earlier this week, the country’s Financial Intelligence Unit imposed a record C$176.9 million fine on a Vancouver-based cryptocurrency platform for violating anti-money laundering laws, citing thousands of unreported suspicious transactions related to child exploitation, ransomware, and sanctions evasion.
To date, the fine is the largest ever imposed on a Canadian-registered cryptocurrency company.
decryption We have contacted the British Columbia Tribunal and NDAX Canada for additional comment and transaction details. Efforts were made to contact Mr. Xu through his legal representative.
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