Xapo and Indodax Slapped with Lawsuit After 500 Stolen BTC Tracked to Exchanges

  • Plaintiff Dennis Nowak and his attorney have sued crypto firms Xapo and Indonesia based exchange Indodax in a Federal California Court
  • Alleging that 500 BTC was stolen by hackers and the crypto was traced to addresses in the two firms.
  • The suit has alleged that the lax AML and KYC protocols on their platforms have offered safe havens to cybercriminals.

Reports have emerged that crypto firms Xapo and Indodax are facing a lawsuit in a District Court in Northern California filed on 1st June. The plaintiff Dennis Nowak, who is of German descent and his attorney David Silver, has lodged a lawsuit against the two companies for harboring his stolen crypto funds. The suit alleges that they helped a cyber-criminal group rob the plaintiff of his 500 BTC, which was approximately $2,300,000 at the time.

They have accused the two firms of intentionally implementing lax KYC and AML policies which created an enabling environment for the criminals. The suit has disclosed that the plaintiff deposited 500 BTC in a USA crypto exchange on 20th Nov 2018. The BTC was all siphoned by John Doe NOS, a group of hacktivists from Nowak’s account 3 days later on the 23rd by 4 pm.

Lax KYC and AML policies

Close examination by cyber sleuths, Kroll followed an elaborate trail that revealed the initial 500 BTC were stored in accounts in Xapo and Indodax with each holding 19.99 BTC and 479.69 BTC respectively. They stand accused of being safe havens for cybercriminals who stored their stolen loot there with more than 2,900 BTC from some 24000 USA exchange accounts directly being channeled to Indodax addresses.

The analysis further uncovering that no obvious attempts were made by INDODAX and XAPO to question or flag the transactions as BTC was moved into the accounts in less than half a dozen steps. This has exposed their lax KYC and AML protocols as they are in place to help identify clients and the amount of risk to money laundering they pose.

Attorney David Silver is a strong Blockchain proponent who has seemingly dedicated his career to fighting Blockchain-related injustices. He has launched successful suits including a 2015 Coinbase related case where pilfered funds were traced to a Coinbase account. He has also been involved in suits against Nano and Tezos with his high profile putting the odds of accepting a case at 20%.

Notably, Xapo was acquired by Coinbase in May of 2019 in a $50 Million deal. They faced off against Fidelity Digital Assets in a heavily contested bidding battle.

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