Bitcoin-to-gold website Coinabul LLC is facing a serious federal class action alleging that it defrauded some of its clients.
The leading plaintiff is Yazan Hussein, who claims he transferred 1,644.54 BTC to Coinabul last year, but did not receive the gold he ordered.
The federal complaint was filed in Illinois on 25th July. It names Coinabul and its CEO Jason Shore as defendants. Hussein demands a jury trial.
Dore added that Edelson wishes to pursue the complaint as a civil matter to ensure that all bitcoins involved in unfulfilled transactions are returned.
"The contracts that were entered into were simply not performed and [Coinabul] showed no ability or interest in performing those contracts," he said. "What we want – and what we feel is best – is for all the bitcoins to be returned, and then everyone simply goes forward and that is the end of the case."
Dore said Edelson has not been in touch with Coinabul yet.
No shipments since last June
The suit alleges that Coinabul stopped honouring its sales more than a year ago, back in June 2013. However, Coinabul continued to take orders and accept bitcoin payments for precious metals it did not have in stock, the plaintiffs claim.
The complaint describes the nature of the case as follows:
The plaintiffs claim Coinabul stopped shipping the promised gold or silver and thus unlawfully misappropriated millions of dollars worth of customers' bitcoins.
Delays, excuses, more delays
The complaint states Coinabul unexpectedly stopped shipping precious metals to their customers approximately two years after it was founded in 2011. This caused a backlash, especially on bitcoin forums such as bitcointalk.org.
Coinabul responded to the controversy by taking part in online discussions and apologising for "longer-than-usual delays".
The company went on to issue additional ambiguous statements in an attempt to alleviate customer concern over the unfulfilled orders. Then, in July 2013, Coinabul sent an email to customers claiming that it was unable to find a bank willing to take its business.
However, in the email Shore claimed that a "large portion of outstanding orders" had already received tracking numbers and were en route to customers.
The complaint alleges the company never stopped accepting bitcoins for new orders, although it had no intention of fulfilling them.
Hussein's history with Coinabul
Hussein claims Coinabul still owes him 1,644.54 BTC. The unfulfilled orders were placed between 22nd-24th June last year.
Prior to these unfulfilled orders, Hussein spent approximately 1,400 BTC on gold coins and bars from the website. However, these shipments were fulfilled within several weeks.
After noticing that his last two orders were not fulfilled in a reasonable timeframe, Hussein began contacting Coinabul in July 2013.
Following an email exchange he decided to ask for his money back on 4th September. However, Coinabul informed Hussein that he was at "the mercy of the banks" and that the company could not fulfil any orders.
Over the next few months Hussein said he merely got vague excuses for why his orders were not shipped. Eventually he decided to take legal action.
Crucially, the complaint states that the exact number of class members is unknown to the plaintiff, but it points out that Coinabul received "over a thousand" orders. It is unclear how many of these remain unfulfilled.
"We have been contacted by other people, so it's definitely not isolated," said Dore. "I can't really say [how large the class is]. It's not gigantic, if I had to guess, I would say it's in the thousands."
Read the court document in full below:
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