Federal Judge Dismisses Class-Action Lawsuit Against Atomic Wallet Due to Lack of Jurisdiction

In a recent legal development, a federal judge in Colorado has dismissed a class-action lawsuit against Atomic Wallet, citing insufficient grounds to establish jurisdiction over the Estonian cryptocurrency firm. The ruling, issued on September 10 by Judge Philip Brimmer, also affects key individuals associated with the company, including its CEO Konstantin Gladyshev, shareholder Pavel Sokolov, and Evercode Infinite, the software development firm behind Atomic Wallet.

Background of the Lawsuit

The lawsuit was initiated in August 2023 by a group of users who had stored cryptocurrencies using Atomic Wallet. The case emerged in the wake of a significant security breach in June 2023, where the wallet provider suffered a $100 million hack. The plaintiffs alleged that the firm was liable for the loss of their assets due to the breach.

In its defense, Atomic Wallet filed a motion to dismiss the lawsuit in November 2023, arguing that it had no substantial ties to the United States. The company contended that out of the 21 plaintiffs, only one, Graham Dickinson, was based in Colorado, the state where the lawsuit was filed.

Court’s Ruling on Jurisdiction

Judge Brimmer’s decision focused on the issue of jurisdiction. He ruled that the plaintiffs had not demonstrated sufficient grounds for the court to assert jurisdiction over Atomic Wallet or its associated individuals. The judge noted that the connection between Atomic Wallet and Colorado was too tenuous to justify legal proceedings in the state.

The court’s ruling highlighted several factors:

• Nature of Products: Judge Brimmer pointed out that the products involved were software applications, which are not physically shipped and thus do not inherently establish a business presence in a particular state. Unlike tangible goods, software can reach users without the company knowing their exact location.
• Marketing and Communication: The plaintiffs had argued that Atomic Wallet’s advertisements were visible in Colorado, its mobile app was downloadable in the state, and Dickinson communicated with the company’s customer service from Colorado. However, Judge Brimmer found these claims insufficient to establish that Atomic Wallet deliberately targeted the Colorado market.

“The nature of the products at issue here — software applications — makes it even less likely that Atomic Wallet deliberately exploited the Colorado market by making the applications, mnemonic keys, and security updates available to Mr. Dickinson or by sending cash back tokens to him,” the judge stated.

Next Steps for the Lawsuit

Despite the dismissal of the claims against Atomic Wallet and its associates, Judge Brimmer allowed for a brief extension regarding defendant Ilia Brusov, a founder of Evercode Infinite and shareholder in Atomic Wallet. The plaintiffs have been granted an additional 21 days to provide arguments on why the lawsuit against Brusov should not also be dismissed.

Brusov, who holds a 12.8% stake in Atomic Wallet, is being treated separately from the other defendants. Gladyshev, who owns 74.4% of the company, and Sokolov are also named in the lawsuit but are similarly affected by the jurisdictional issues.

Implications and Future Developments

The dismissal of the lawsuit underscores the challenges of establishing jurisdiction in cases involving international cryptocurrency firms. The ruling emphasizes the importance of demonstrating substantial business ties and deliberate targeting of a specific market when seeking to hold a company accountable in a particular jurisdiction.

As the legal landscape for cryptocurrency companies continues to evolve, stakeholders and users should stay informed about the implications of such legal decisions. The outcome of the ongoing case against Brusov could further influence how jurisdictional issues are addressed in similar cases in the future.

September 2024, Cryptoniteuae