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High court denies Coinbase effort to pause user suits

The justices will allow litigation and discovery to move forward in suits from former users against one of the largest crypto exchanges in the world.

WASHINGTON (CN) — The Supreme Court denied an effort to halt lawsuits against cryptocurrency giant Coinbase on Wednesday. 

Coinbase — an online cryptocurrency exchange — asked the high court to halt litigation and discovery in two lawsuits filed by former users. The company claimed allowing lawsuits to move forward ahead of appeal would cause irreparable harm. 

The applications were submitted to Justice Elena Kagan and referred to the court. The justices also rejected a request to take up the case. They didn't offer an explanation for their decisions.

One former user, Abraham Bielski, is suing Coinbase after he was scammed out of over $31,000. Bielski allowed an individual who claimed to be a representative from PayPal to access his account. Coinbase claims it specifically warns users against this scam in its user agreement. Bielski said the company was not responsive to his efforts to contact it after the fraud on his account. 

Coinbase said since Bielski signed the user agreement which contains a delegation clause compelling arbitration, he should have to go through arbitration. A federal judge disagreed, finding the agreement in violation of general contract principles and therefore unenforceable. 

The company is appealing the ruling but wanted to halt court proceedings including discovery while the appeal is pending. The district court and the Ninth Circuit declined these efforts. 

“Because Coinbase’s arbitrability appeal automatically ousted the district court’s jurisdiction to proceed before the appeal is resolved, Coinbase is entitled to an automatic stay of district court proceedings,” Neal Katyal, an attorney with Hogan Lovells US representing Coinbase against Bielski, wrote in the company's application.

Bielski told the justices Coinbase was not warranted a stay because it wasn't actually facing any injury should the suit move forward. 

“The only injury Coinbase has identified is the additional cost of litigation in the district court that it might not incur in arbitration,” Hassan Zavareei, an attorney with Tycko & Zavareei representing Bielski, said in a brief. “But litigation costs, even when ‘substantial’ (Coinbase’s would not be, if it incurs any at all), ‘do[] not constitute irreparable injury.’” 

David Suski, another former user, is also suing Coinbase in a class action stemming from a giveaway the company hosted in 2021. Similarly, Coinbase tried to force arbitration but a district court sided with Suski. The Ninth Circuit also denied a stay on litigation in the case. 

The company was founded in 2012 and has since become one of the largest global crypto exchanges. Last year it was valued at nearly $86 billion at its debut on Wall Street. However, this week the company reported over $1 billion in losses in the second quarter causing its shares to drop. 

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