A new legal battle has emerged over the operations of a major cryptocurrency platform, raising significant questions about consumer protection and corporate accountability. On September 12, 2024, plaintiffs Darren Kramer, Manish Aggarwal, Mostafa El Bermawy, and Amish Shah filed a complaint against Coinbase, Inc. in the San Francisco Superior Court. The case revolves around allegations that Coinbase misrepresented its security features to users, violating several California consumer protection laws.
The plaintiffs accuse Coinbase of deceptive practices under the Consumer Legal Remedies Act (CLRA), the California False Advertising Law (FAL), and the California Unfair Competition Law (UCL). According to the court documents, users who created accounts on Coinbase’s platform were required to accept a user agreement containing an arbitration provision. This provision stated that any disputes would be resolved through binding arbitration rather than in court. However, when hackers allegedly accessed Aggarwal's and El Bermawy's accounts and stole funds, they claimed Coinbase failed to protect their accounts or mitigate their losses. Consequently, they filed a class action lawsuit in federal court seeking various remedies including public injunctive relief.
Coinbase moved to compel arbitration based on its user agreement but was denied by the trial court. The court ruled that since the plaintiffs sought public injunctive relief—aimed at benefiting the general public rather than just themselves—the claims were not subject to arbitration. "Here, the complaint plainly shows that plaintiffs are only seeking public injunctive relief," noted the trial court judge. The ruling emphasized that the requested injunctions were designed to prevent future harm to consumers at large rather than address individual grievances.
The plaintiffs' complaint specifically alleges that Coinbase misled consumers about its security measures through various forms of advertising. They argue that these misrepresentations enticed users into creating accounts and depositing funds with Coinbase under false pretenses. "If Coinbase is permitted to continue its deceptive and misleading practices," states the complaint, "members of the public will suffer irreparable injuries beyond losing substantial sums of money." The plaintiffs seek an injunction prohibiting Coinbase from continuing these alleged deceptive practices.
On appeal, Coinbase contended that the claims should be arbitrated because they sought private injunctive relief for existing customers rather than public relief for all consumers. However, this argument was rejected by both lower courts and appellate courts which have consistently held that such claims are aimed at protecting broader consumer interests.
Representing the plaintiffs are attorneys specializing in consumer protection law who argue that their clients’ experiences highlight systemic issues within Coinbase’s operations affecting all users. The case is being heard by Judge Petrou with Judges Tucher and Fujisaki concurring on Case ID A167779/Kramer et al., v. Coinbase Inc., et al.