I Love Bitcoin. That's Why I Sue Exchanges

The lawyer who's filed more crypto class actions than any other speaks out on his outlook on the blockchain industry.

AccessTimeIconJan 8, 2018 at 9:00 a.m. UTC
Updated Sep 13, 2021 at 7:21 a.m. UTC

David Silver is the founder of Silver Miller, one of the preeminent plaintiffs' law firms in crypto litigation. Silver Miller prosecutes cases against wayward cryptocurrency exchanges and misleadingly presented crypto-investment offerings. The firm is focused on representing victims of financial fraud.

The following article is an exclusive contribution to CoinDesk's 2017 in Review.


"You take the blue pill, the story ends. You wake up in your bed and believe

whatever you want to believe. You take the red pill, you stay in Wonderland,

and I show you how deep the rabbit hole goes."

– Morpheus, "The Matrix" (1999)

I grew up the son of a personal injury lawyer in New York and have been exposed to the law my entire life. I worked in Washington, D.C. for nearly 10 years at one of the largest and fanciest law firms in the country before I started my own firm. I have even represented high-profile and high-net-worth people and companies.

None of this fully prepared me for my entry into the world of digital currency. It was like Keanu Reeves entering his own digital world in "The Matrix," and it happened at a South Beach bar in 2014.

After a few drinks, one of my friends took out his smartphone and sent me 5 BTC to impress our other friends. Much like when Neo swallowed the red pill that was offered to him, getting those bitcoin introduced me to a Wonderland in which I learn every day how much deeper the rabbit hole goes. (By the way: Thank you, unnamed friend! I have yet to move those bitcoin and have them sitting in the same wallet where you placed them almost four years ago!)

But I'm also active in the industry in another way.

In the last three years, I have filed lawsuits against Cryptsy, Coinbase, Kraken, Tezos and Monkey Capital to name a few. More lawsuits are coming in the days, weeks and months ahead. Dare I say, I have filed more litigation in this space than any other lawyer in the country. I travel the country speaking at conferences, lectures and on TV.

I have been quoted in articles published by CoinDesk, Reuters, Bloomberg and The Financial Times regarding cryptocurrency and bitcoin as an investment.

People ask me all the time: "Is bitcoin a good investment? If so, where should I buy it?"

From my unique perspective in the cryptocurrency Wonderland, I tell those people: "I have absolutely no $#@#$!% idea whether the price of bitcoin is going up or down, what alternative cryptocurrency you should buy to invest in today, or where you should buy it!"

The next question is usually: "Seriously, what should I do?" I can only laugh and think to myself: "If I knew the answer, I would invest myself." For your information, I don't; simply because I do not know what the price of bitcoin is going to do. If I did, I would have invested in 2014 after my friend gave me those first five bitcoin.

The exchange lie

What I do know, and what I can speak about somewhat intelligently, is the universal myth that currently exists for people who are first experiencing cryptocurrencies: that all U.S.-based crypto exchanges are the same.

This myth is the single biggest threat to any investor money in this space. KNOW. YOUR. EXCHANGE.

There is a difference between Bittrex, Poloniex, Coinbase, Kraken, Gemini and several other lesser-known exchanges. They are not the same. The prices of your crypto on the exchanges are different, the rules and regulations they follow are different, the security is different and the quality of leadership is different.

How each exchange handles challenges and adversity is different. I'm not here to endorse any of the different exchanges, but I can tell you that each one secures customer assets, handles customer issues and provides support differently. Some are akin to legitimate banks; others are more like Bernie Madoff, with the appearance of sophistication and wealth while in reality, they are just common thieves and fraudsters.

What happens when a flash crash occurs and clients lose money? What happens when that flash crash only occurs on one exchange but not others? What happens when that exchange happens to provide customers with margin trading like a traditional investment house but denies that those rules apply to them? What law applies and what government agencies have the power to enforce the theoretical laws that apply? When catastrophe strikes, what happens?

Some exchanges respond to catastrophic events by refunding their customer accounts, other exchanges tell customers they're #@$% out of luck.

While the latter might be good for my business – because wrongfully imposed customer losses are where lawsuits are usually born – that's not good for the consumer.

If you have ever heard me speak on this topic, you know I am a passionate believer that regulation is coming and that it's going to come hard and fast in the U.S.

Point of failure

That day of reckoning will collapse the weaker exchanges. Which exchanges will survive? Typically, those with the best leadership and that operate with transparency will rise to the top. As for those that fail?

Good luck collecting on your losses if you had entrusted your crypto to one of those exchanges. It's expensive, time consuming and you never know how it will turn out.

As for which ICOs are viable and which ones are not, the ability to pick a winner might be a bit easier.

The answer there is: None of them have yet proven themselves to be winners; and any of them that look like winners might not in the near future once Uncle Sam and his relatives around the world wrap their hands around ICOs and crypto-related investments.

While I believe that more people are going to join the bitcoin and cryptocurrency parade, regulation and government intervention are going to change all the rules. I have been caught on camera advising crypto companies to get a 100 percent guarantee of free legal defense fees if their companies relied on legal advice at $1,000+/hour and that advice turns out to be flat wrong.

Some of my lawsuits and the lawsuits of others will demonstrate that the fallacies that some of these companies are promoting flagrantly violate of the law. There has yet to be an ICO that did not perform that was not a security.

There, I said it. I’m sure that lost in the flood of investment opportunities is the next potential Amazon or Netflix, but for now, the safety of more traditional investments is the right choice for most people.

I find it odd and incredibly ironic that the self-proclaimed thought leaders on regulatory advice at the largest law firms charging the most per hour are the same lawyers telling media outlets that people should only invest in a crypto company an amount they can afford to lose.

That’s terrible legal advice and terrible investment advice.

My outlook

In the crypto Wonderland, an educated consumer is the best consumer.

To be clear, just because my firm is involved in litigation against an exchange or a company that raised funds via an ICO does not mean that exchange or ICO won’t survive or isn't legitimate.

To paraphrase the fictional character Amy Gardner on the TV show "The West Wing":

"I've been crazy about [crypto] for longer than you've known [about it]. And I'll keep poking [it] with a stick. That's how I show my love."

I show my love to protect my clients who were early adopters in this space and have been blown out of it by companies who believe they are above the law. I hold companies accountable as they grow and scale, and I'll keep poking those companies with my lawsuits. That does not mean I love those companies or crypto any less. As these companies grow, scale, and legitimize in the U.S., they will learn that with responsibility comes accountability.

What you say and what you do matters. If you don't believe that, either the government or a process server with a Complaint from Silver Miller is headed your way.

The upcoming year is going to be a wild ride for this space.

At FinTech 2017 in Washington, D.C., some people even claimed that 2018 is going to be "The Year of Crypto Litigation." They're probably right. However, if there is litigation, that means people have lost their money. That's not good for crypto consumers or crypto businesses. I hope 2018 is the year of transparency and serviceable regulation.

A pinch here and a pinch there, not too little and certainly not too much. While many of my clients began as anarchists- and libertarians-at-heart, their focus changed when bad actors did bad things to them.

When someone steals your money and you lose that which you believe belongs to you, you seek justice.

In the U.S., justice requires law and order. In one of my cases, we had to get a federal court judge to order the return to my clients of 11,000+ stolen bitcoin, presently valued at over $150 million. When my clients had their bitcoin stolen from them, they stopped caring so much about decentralization and autonomous and anonymous transactions.

At that point, they simply cared about their missing cryptocurrency.

And in an ironic twist of fate, the person who helped my clients regain their faith in the non-governmentally-regulated world of cryptocurrency was... a government officer with a robe and a gavel. Maybe some government intervention into the crypto Wonderland isn't so bad after all.

Internet crime image via Shutterstock


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