Brian Klein and Teresa Huggins Achieve Significant Victory with New York Judge’s Ruling on Defunct Cryptocurrency Exchange Bitfloor

Partners Brian Klein and Teresa Huggins won a significant victory for client Bitfloor, Inc. and its founder Roman Shtylman when Manhattan Supreme Court Justice Jennifer G. Schecter granted partial summary judgment to onetime customers of the failed cryptocurrency exchange but also granted in part Bitfloor and Shtylman’s cross-motion, agreeing with Bitfloor and Shtylman that the damages awarded should be limited to the dollar value of the digital assets more than a decade ago and that many of the plaintiffs were barred by statutes of limitiations. The Law360 headline read “Crypto Exchange Must Refund Bitcoins, but in 2013 Dollars.”

The judge found that Bitfloor, which operated as a cryptocurrency exchange between 2012 and 2013, breached user contracts when it was unable to return certain user bitcoins due to its founder’s inadvertent deletion of private keys for three cryptocurrency addresses that held user bitcoins in an off-line cold wallet. This mistake resulted in the five plaintiffs being unable to withdraw their total of 217.38 bitcoins from Bitfloor when Bitfloor closed in 2013, said Justice Schecter.

Importantly, Justice Schecter denied the plaintiffs’ request to receive damages at the current price of bitcoin or in the form of the 217 bitcoins themselves, which today are worth almost $14 million. Instead, the damages will be awarded in U.S. dollars based on the price of bitcoin when the breach of contract occurred in 2013. At that time, the 217 bitcoins were worth approximately $15,000.

Justice Schecter additionally granted Bitfloor and Shtylman’s motion to eliminate the breach of contract claims of seven other customers whose allegations were barred by the statute of limitations in their states of residents under New York’s borrowing statute. Justice Schecter also dismissed the unjust enrichment claim against Shtylman in its entirety. The Friday, September 19, 2024 ruling from the bench came during a virtual afternoon hearing.