DENVER (CN) – A Colorado man filed a federal class action against the currency exchange Vircurex on Wednesday, claiming it froze $50 million in bitcoin and other cryptocurrencies.
In his complaint filed in the District of Colorado, plaintiff Timothy Shaw accuses Vircurex and founder Andreas Eckert, known online as Kumala, of fraud and unjust enrichment. Shaw says that four years after the freeze, he and 2,500 others are still unable withdraw their assets.
After exchange was hacked twice in 2013, enough users withdrew large amounts to bring Vircurex to near insolvency. To avoid losing user assets entirely, Vircurex said it would freeze account withdrawals and systematically distribute available funds to users, starting with the highest and lowest valued accounts and working their way to the middle.
In addition to bitcoin, Vircurex froze litecoin, terracoin, and feathercoin transactions. At the time of the freeze, Reddit users advised converting assets to dogecoin in order to withdraw funds.
On March 24, 2014, the same day Vircurex enacted the freeze, Shaw says he noticed a favorable exchange rate and traded all of his dogecoin for 12.85 bitcoin. When he attempted to withdraw the lot however, he found his account frozen.
As of a year ago, some 1,600 bitcoin, 124,000 litecoin, and 78,000 terracoin remained frozen – an amount valued at $50 million. A single bitcoin is currently valued at approximately $14,000.
“Rather than repay the frozen funds, defendants took steps to string along plaintiff and the class with deceptive statements and false promises, and made efforts to cover their tracks and create impediments designed to deter accountholders from bringing suit to recover the frozen funds, and efforts to ultimately attempt to vanish without a trace,” Shaw says in the complaint.
In addition to paying out a minimum number of accounts to appear to be making progress, Vircurex added a set of terms and conditions after the freeze to scare off litigation, Shaw says.
“The foregoing terms clearly served to deter accountholders from bringing actions as they were led to believe they would have to travel to Belize in order to do so, that they would have to pay for defendants legal fees and associated costs, and that such efforts would ultimately prove futile,” Shaw says in the complaint.
After an investigation, Shaw’s attorneys at Levi and Korsinsky in New York could not verify Vircurex has any ties to Belize. Instead, they uncovered a trail of comments alluding to operations in Beijing, China, and a quote from Eckert describing the operation as a “German-owned family business,” according to the complaint.
While Vircurex failed to pay out all of its accounts, the exchange also remains open.
Shaw seeks class certification, a finding the defendants illegally converted the class’ funds, an order to return the class’ money, and block of further fund transfers by defendants.
Requests for comment sent to Vircurex were not returned by press time.