Frustrated customers hit BitInstant with a class action lawsuit

Three bitcoiners have filed a class action lawsuit against BitInstant claiming the company misled them.

Aug 15, 2013 at 1:40 p.m. UTC
Updated Sep 10, 2021 at 11:29 a.m. UTC

Three bitcoiners have filed a class action lawsuit against BitInstant claiming the company misled them with false representations about its services.

The class action complaint was received by BitInstant on July 8th, shortly before the company's website closed for maintenance.

Plaintiffs Leandro Icono, Deborah Collins and Ulysses McGhee are being represented by Giskan Solotaroff Anderson & Stewart LLP in their assertions that BitInstant made false claims about the speed of its service and the refund of fees.

The class action complaint states:

"BitInstant purports to provide a means to rapidly pay funds to bitcoin exchanges far faster than other bitcoin processing services. In fact, BitInstant claims that customers can receive 'coins within an hour or two'. Those representations are disingenuous.

BitInstant also promises that it will refund its fees to customers who experience undue delays in the processing of their transactions. Those representations are also disingenuous."

Bitcoin traders Charlie Shrem and Gareth Nelson founded the New York City-based company in 2011, but it was earlier this year that it raised $1.5 million in a seed funding round led by Winklevoss Capital – a tech investment company owned by Cameron and Tyler Winklevoss.

At the time of the investment, Cameron Winklevoss told TechCrunch: “One of the most exciting things about people who are into Bitcoin is that they’re a really passionate community, and Charlie is a passionate entrepreneur. He would be in that category of someone who lives, breathes, and sleeps Bitcoin."

There are mixed reviews of BitInstant on bitcointalk.org and Reddit, with some users reporting long delays in transactions or missing funds, but others praising the company for the speed of their payment processing.

Last month, bitcointalk.org forum member RoadTrain said: "They held my $300 I sent in 2 transactions for 2 weeks. Recently I got the first $200 to bitstamp. They charged fees though somewhere I heard that they don't charge fees when the payment is delayed. Now I am waiting for the remaning (sic) $100 but not getting any replies."

Reddit user montseayo had a more positive experience: "My cash directly to Bitcoin wallet transaction for $50 USD went through almost instantly. Had a couple of confirmations within 20 minutes."

Charlie Shrem told CoinDesk: "We have not had a chance to review the [class action] complaint with our lawyers, so we can't comment on its details.

"As everyone in the bitcoin community knows, though, we're dedicated to doing right by all of our customers and are surprised to learn that any have unresolved support issues. We are committed to demonstrating that to the bitcoin community every day."

BitInstant has been in the news already this week after it was reported to have received a subpoena from the New York Department of Financial Services requesting information about the way in which it operates.

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