Coinbase, one of the world’s largest cryptocurrency exchanges, is facing a class-action lawsuit alleging they illegally harvested biometric data from their customers. Filed in the Northern District Court of California, the lawsuit takes Coinbase to task for their alleged misconduct, demanding the company face repercussion for their actions.
1. Coinbase Sued for Alleged Illegal Harvesting of Biometric Data
Jurisdictional Dispute
- Coinbase has been sued in federal court in Illinois by two individuals alleging that the cryptocurrency exchange harvested biometric data without the users’ consent, according to court documents filed last week.
- Coinbase contends that it is not subject to provisions of the state’s Biometric Information Privacy Act (BIPA). The plaintiffs, however, claim that Coinbase has failed to comply with their obligations under BIPA.
What the Law Requires
- Under the state law, companies are required to obtain consent from users in order to collect, store, and use biometric data. This includes items such as fingerprints, retinal scans, and facial recognition data.
- Coinbase argues that it cannot be held liable for potential violations of this law, as the company does not store, transfer or delete personal biometric data.
- Coinbase also argues that because its user agreement is written in Contenenten law, and its services are provided to users located in Illinois, the federal court does not have jurisdiction over the case.
Plaintiffs’ Claims
- The plaintiffs allege that Coinbase illegally harvested users’ biometric data through facial recognition technology without obtaining express written consent.
- In addition, they claim that Coinbase stored the biometric data without informing users that the data was being collected and how it was being used.
- The plaintiffs also said that Coinbase enabled users to authenticate their identity only with biometric data, thus preventing them from accessing their accounts without providing their biometric data.
The Legal Ramifications of the Case
- The case is highly relevant for companies that offer services that involve user authentication, such as financial institutions, as there could be ramifications for companies that violate BIPA.
- However it is also important to note that this case is not the first time that a company has been accused of violating BIPA. In 2021, another company was found to have violated BIPA by collecting biometric data without the users’ consent.
- Given the implications of the case, companies will likely be paying close attention to the outcome. If Coinbase is found to have violated BIPA, then it could set an important precedent for companies in the technology sector.
The Legal Team
- The case is being led by the Chicago-based law firm Edelson PC, which specializes in litigating data breaches and privacy law violations.
- Edelson PC has previously brought legal proceedings against other large technology companies for their failure to safeguard user data.
- The case against Coinbase is expected to be closely watched, as a judgement could set important precedents for tech companies and how they operate across state lines.
2. Class Action Lawsuit Accuses Company of Violating Illinois Law
A class action lawsuit has been filed against a company in Illinois, alleging that the company is violating state laws. The lawsuit, which was filed in the United States District Court for the Northern District of Illinois, accuses the company of violating the Illinois Consumer Fraud and Deceptive Business Practices Act.
The lawsuit was filed by a group of consumers who claim they were victims of the company’s business practices. The group is alleging that the company used deceptive practices to market and advertise its products. The lawsuit alleges that these practices included making false claims about the product’s performance, charging more than what the products were actually worth, and not disclosing the true costs associated with the products.
The lawsuit further claims that the company failed to honor its stated return policy, which caused the consumers to be financially harmed. The plaintiffs are seeking damages for their losses and other damages, as well as a permanent injunction against the company.
The lawsuit claims that the company violated several Illinois laws, including the Consumer Fraud and Deceptive Business Practices Act, the Uniform Deceptive Trade Practices Act, the Trade Regulation Law, and the Fair Credit Reporting Act. The plaintiffs are arguing that the company’s actions constitute unlawful, unfair, and/or deceptive acts or practices, which is a violation of the Illinois Consumer Fraud Law.
Alleged Violations of Illinois Law
- False advertising
- Misleading statements about the product performance
- Charging more than the product is worth
- Failing to disclose true costs associated with the product
- Failure to honor return policies
The plaintiffs are asking the court to award them damages, compensatory damages, punitive damages, attorney fees, costs, and other relief as the court deems appropriate. A hearing on the matter has not been scheduled yet.
3. Potential Legal Penalties for Coinbase
Coinbase has a vast set of rules and regulations with which it must comply. Breaching these can lead to some serious penalties and repercussions. When it comes to legal action against Coinbase, here are three areas of legal penalties that could apply.
Civil Action
Those who feel that Coinbase’s actions have injured them can file a civil action against the firm. A civil action lawsuit typically results in an award of monetary damages. It’s important to note that simply claiming that Coinbase did something wrong isn’t enough for a civil action lawsuit. There has to be evidence proving that Coinbase acted with disregard or was negligent.
Federal Regulatory Action
If Coinbase is found to be breaking the law by either breaching industry regulations or federal laws, they could be the subject of a federal investigation. Such a situation could lead to the closure of their services, hefty fines, and possible prison sentences for executives. This type of legal action is often taken when Coinbase commits fraud or takes other unethical business practices.
State Regulatory Action
State governments can also take regulatory action against Coinbase. This can include financial complaints, fines, and even revoking Coinbase’s ability to operate within the state. A state regulatory action is typically reserved for less serious offenses than that of federal regulatory action.
Coinbase may also be faced with the possibility of agreement-related actions. If customers feel that Coinbase has agreed to something or acted in a way that breaches the agreement, then a legal action can be taken against the company. This could lead to a breach-of-contract lawsuit and various fees and penalties being imposed on Coinbase.
In addition, Coinbase may face class-action lawsuits. These are typically brought about when a large number of individuals feel that Coinbase has done something wrong or fraudulent. The outcome of these suits can be a large settlement or judgment against Coinbase.
4. Coinbase Says it is Investigating the Allegations
In response to the accusations, Coinbase has announced that it is actively conducting an investigation on the matter. The exchange says:
“Coinbase takes these allegations very seriously and has immediately started an internal investigation as we take any such reports very seriously. We will update our customers as we learn more.”
Coinbase maintains that it was unaware of the allegations before they surfaced. With the recent allegations, they are doing their best to investigate the accusations.
The main allegations surround the lack of reporting by certain trading in activity and the supposed theft of money by traders on the platform.
The allegations began when a trader posted screenshots alleging that the platform had let certain traders “trade away” hundreds of thousands of dollars worth of his funds.
- He alleged that Coinbase had let traders conduct artificial trades without reporting it.
- He also alleged that Coinbase took part in a scheme to steal funds.
- The trader said that he had lost almost $300,000 in the process.
It is not clear what the outcome of the investigation will be. The exchange has declined to comment further on the investigation. For now, Coinbase is taking the accusations seriously and is looking into the matter.
5. Potential Damage to Coinbase’s Brand if Allegations Are True
Although many in the crypto industry are hoping that the allegations against Coinbase turn out to be unfounded, the reality is that the exchange’s reputation could be significantly impacted if the allegations of insider trading and market manipulation prove to be true. Here are five potential damages to Coinbase’s brand if the allegations are true:
- Loss of Trust: The allegations cast a long shadow over the legitimacy of Coinbase’s trading platform. If the allegations prove to be true, it will be difficult for Coinbase to erase the trust deficit among its customers.
- Negative Attention: Even if Coinbase avoids legal repercussions, the negative publicity brought by these allegations could have a lasting impact on the company’s reputation. This could lead to customers leaving the platform and damaging Coinbase’s future prospects.
- Market Competitors Gaining Ground: If the allegations are true, it could open the door to competing exchanges to gain market share. This could lead to an erosion of Coinbase’s position as a market leader.
- Regulator Intervention: If Coinbase is found to have engaged in market manipulation and insider trading, it could lead to increased regulatory scrutiny of the exchange. This could lead to increased compliance requirements and stricter oversights for Coinbase in the future.
- Shares Price Impact: The allegations could also lead to a decrease in the price of Coinbase’s shares, as investors become wary of the exchange. This could limit the company’s ability to raise capital in the future.
- Legal Action: If Coinbase is found to have been involved in insider trading or market manipulation, it could face serious legal repercussions such as fines, penalties and even jail time for those involved.
It is incumbent upon Coinbase to get ahead of these allegations and take steps to restore the trust of its customers and the crypto community at large. As the situation develops, it remains to be seen how much damage this saga will cause the exchange’s reputation.
6. Growing Concerns Over Privacy Laws and Technology Companies
The current state of technology is causing increased anxieties around privacy and data collection, with many citizens concerned about how technology companies are collecting and protecting their personal data. The majority of people are unaware of how their information is being used and where it being stored.
The challenge for companies lies in following the continuously-evolving privacy laws and regulations, while at the same time navigating the complexities of tecnological advancements such as artificial intelligence and machine learning. Despite privacy laws being implemented in many countries, many businesses are not compliant with the rules and regulations.
Issues over data protection and privacy are becoming even more complicated when considering the cloud computing industry. Businesses are increasingly relying on cloud services to store their data, but this means that the data protection rests solely in the hands of the provider. Fortunately, the majority of cloud service providers have proven records of safeguarding user data, but this doesn’t always stop companies from misusing user information.
The growing intensity of cyber-security threats is another cause of concern. Attackers are becoming more adept at stealing data, bypassing the cyber-security systems of most companies. Regulators are therefore stepping up the pressure on technology companies to better protect their clients’ data.
Privacy is also a growing concern for consumers. In this digital age, people often unknowingly share their personal information with tech companies in exchange for convenience. Consumers are becoming increasingly aware of the risks associated with being too liberal with their data and are now demanding higher levels of transparency from these companies.
Governments across the world are pushing for stricter privacy laws in order to protect citizens’ data and “right to privacy”. This will no doubt require a holistic approach from both the private and public sectors, but technology companies need to do more to address the current privacy concerns.
The lawsuit serves as another reminder of the importance of digital privacy and of the significance of data protection laws. While there is still insufficient data to demonstrate the actual effects caused by the alleged sharing or sale of biometric data, this particular case demonstrates the need for a set of overarching rules when it comes to the mining of such information. Until such a system exists, it is up to companies to ensure that their data handling practices are both legal and responsible.