Court denies Miami man protective order in case involving $8 million in lost cryptocurrency funds

Fibo Quantum

MIAMI — A Miami man was denied his request for a protective order to prohibit a digital cryptocurrencies company’s communication with class members in a suit  involving the loss of more than $8 million in customer funds.

According to the June 24 U.S. District Court for the Southern District of Florida filing, plaintiff Brandon Leidel and others petitioned the court for a protective order to prohibit defendant Coinbase Inc., doing business as Global Digital Asset Exchange, from communicating with or seeking discovery from absent class members. 

Leidel was among the customers of Cryptsy, a cryptocurrency exchange company, that allowed customers to trade digital cryptocurrency such as Bitcoin. Prior to fleeing the country, Cryptsy’s owner had used Coinbase’s website to convert more than $8 million of customers’ Bitcoin into cash and depositing the money into his personal bank account. As a result, Leidel filed suit against Coinbase on behalf of Cryptsy’s customers.

Up for review with the district court was the question of whether Leidel could block Coinbase’s communication with absent class members “without first conferring” with him then having the court settle any disagreements over the appropriateness of the communication. Leidel argues that since Coinbase waited until the end of the discovery period to serve discovery on the putative class members a protective order is relevant. 

Coinbase argues Leidel does not have a basis for wanting to review or approve of any communication with absent class members and that this “information investigation” is allowed by both parties even after discovery. 

The court found it would not be able to determine if the communication “threatens the proper functioning of the litigation” and that Leidel had failed to demonstrate any evidence supporting that theory and that a protective order was “premature.”

U.S. Magistrate Judge William Matthewman denied Leidel’s request for a protective order without prejudice with a chance for review if Leidel could show “good-faith belief” while allowing Coinbase’s communication with the putative class members.