B.C. woman who lost $670K in crypto scam fails to recover funds in Supreme Court
A B.C. woman who suffered “regrettable” losses in a cryptocurrency scam has failed to recoup her losses in the province’s highest court.
According to the B.C. Supreme Court decision, YLX is an investor who was befriended by someone she is unable to name.
The plaintiff was initially convinced by her new friend to send small amounts ranging from $500 to $1,000, which were returned to her with “generous returns.”
“After the plaintiff’s trust was established, the plaintiff was asked to purchase a large sum of cryptocurrency on the promise that if invested, she would make a significant return in the range of one per cent per day,” explained the Reasons for Judgment by The Honourable Justice LeBlanc.
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In order to obtain the funds needed for the crypto investment, YLX remortgaged her house and borrowed money from a friend.
She opened an account with Calgary-based NDAX, the defendant in the case, through their online platform in April 2023.
The B.C. Supreme Court stated that to meet compliance requirements from the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), NDAX required her to provide personal information and government-issued ID, which they verified as part of the Account opening process.
“On opening the Account, the plaintiff was presented with a User Agreement and separate Risk Statement for review and acceptance,” the decision notes.
“The plaintiff did not read the User Agreement or the Risk Statement and clicked on the ‘accept’ button so that she could open the Account. By clicking accept, the plaintiff agreed she received, read and understood the Risk Statement and agreed to the terms of the User Agreement.”
Etherium
The plaintiff made multiple deposits into her NDAX account between April and May 2023, totalling $671,000. The funds were used to purchase units of the cryptocurrency, Ethereum.
B.C. Supreme Court outlined the timeline of transfers from the plaintiff to the scammer, as well as a series of warnings that NDAX sent her, starting in the spring of 2023.
“On April 18, 2023, the plaintiff initiated a withdrawal of Ethereum to an external wallet. To facilitate the transfer, the plaintiff provided a personal wallet address to the defendant.
“When it received the plaintiff’s request to process the First Withdrawal, the defendant provided the plaintiff with a number of warnings and disclosures concerning the risk associated with continuing.”
YLX was given a withdrawal crypto risk disclosure statement, which included several warnings, such as not proceeding with the withdrawal if anyone has accessed your device remotely, only sending cryptocurrency to trusted wallets, and being aware of common crypto scams like high-return investments.
“The plaintiff confirmed to the defendant that she had received and understood the Crypto Risk Disclosure by clicking accept on these platform pages,” said the Reasons for Judgement.
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The plaintiff received a second warning, and she confirmed to the defendant that she wanted to proceed. It stated, “I confirm the information I’ve provided is accurate, correct, and complete. I understand crypto asset withdrawals are final and irreversible. NDAX will not be liable for losses from my inaccurate information or for delays from network issues outside NDAX’s control.”
An NDAX employee phoned YLX directly to warn her that she was likely “being scammed” and should not go ahead due to the transaction exhibiting risk factors.
“I find that the defendant’s warnings to the plaintiff could not have been clearer,” wrote Justice LeBlanc.
However, after the recorded phone call with the defendant’s employee, YLX sent a number of emails to NDAX demanding that the withdrawal proceed without any further delays.
A fourth warning came in the form of another recorded call from an NDAX compliance officer, who informed the plaintiff of the risks of cryptocurrency trading, warned her that she might be the target of crypto fraud, and advised that the First Transaction would be irreversible once processed.
The B.C. Supreme Court detailed YLX’s response, including that “she knew what she was doing and that no one controls her.” She confirmed her instructions to proceed with the First Transaction, and NDAX complied.
“Despite the warnings, the plaintiff transferred all of the purchased Ethereum to a cryptocurrency wallet controlled by a third party becoming the victim of a cryptocurrency scam, resulting in the loss of the Funds,” stated the Reasons for Judgement.
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YLX claimed in the B.C. Supreme Court that NDAX breached a duty of care that was owed to her, and that they should have advised her that the recipient wallet was a “scammer.”
However, Justice LeBlanc disagreed with the plaintiff, stating that the defendant identified the potential that a scammer may be holding the recipient’s wallet and notified them of this information.
“The plaintiff ignored the defendant,” wrote Justice LeBlanc. “There is no evidence or basis to conclude that further warnings by the defendant would have convinced the plaintiff or had any effect beyond the warnings already received.
“Other than refusing to process the First Transaction, something the defendant was not entitled to do, I find there is nothing further the defendant could have been expected to do to prevent the loss the plaintiff suffered.”
The B.C. Supreme Court dismissed the plaintiff’s claim and awarded costs to the defendant.
“If an investment proposal sounds too good to be true, it probably is,” added the Justice. “That was the case for the plaintiff who found herself to be the unfortunate victim of a cryptocurrency scam.”