US Court Dismisses $100 Million Hack Lawsuit Against Atomic Wallet
Date: 2024-09-12 Author: Henry Casey Categories: BUSINESS
A federal judge in Colorado has dismissed a class action lawsuit against Estonia-based cryptocurrency company Atomic Wallet, citing insufficient grounds for jurisdiction.
The lawsuit was filed by a group of users who lost funds in a $100 million hack that occurred in June 2023 and targeted the self-custodial wallet provider.
Despite the dismissal, Atomic Wallet continues to face challenges as affected users attempt to recover lost funds and explore additional legal steps.
Dismissal and Jurisdictional Questions: What's Next for Atomic Wallet Hack Victims?
On September 10, Judge Philip Brimmer of the District Court of Colorado ruled that the plaintiffs had failed to prove sufficient connection between Atomic Wallet and the state of Colorado to establish jurisdiction.
The lawsuit was filed against Atomic Wallet, its CEO Konstantin Gladyshev, shareholder Pavel Sokolov, and software company Evercode Infinite.
The plaintiffs argued that Atomic Wallet’s presence in Colorado was evidenced by the availability of the app for download in the state and advertising on social media platforms such as X (formerly Twitter).
One of the plaintiffs, Colorado resident Graham Dickinson, also cited his regular interactions with Atomic Wallet customer support as evidence of the company’s ties to Colorado.
However, Judge Brimmer rejected these claims, noting that Atomic Wallet’s digital products do not mean it intentionally targets Colorado residents. He emphasized that, unlike physical goods that require shipping to a specific location, software can be accessed globally without knowing the user’s location.
That distinction was key to the judge’s decision, which ruled that Atomic Wallet’s actions did not constitute sufficient interaction with the Colorado market.
Earlier in November, Atomic Wallet filed a motion to dismiss the lawsuit, arguing that it had no significant ties to the U.S. and that only one of the 21 plaintiffs lived in Colorado.
The company argued that simply making its app available for download in the state or serving ads to Colorado residents did not satisfy the legal requirements for establishing jurisdiction.
Judge Brimmer found that minimal contact between Atomic Wallet and Colorado was not enough for the court to engage.
A Series of Legal Challenges Amid Operational Difficulties
The class action lawsuit was sparked by a $100 million hack that compromised about 5,500 wallets in June 2023.
Atomic Wallet users who lost funds in the attack have taken to court in an attempt to hold the company and its management accountable.
The legal battle has escalated as the plaintiffs have tried to prove that Atomic Wallet has sufficient ties to the state of Colorado, but their efforts have been unsuccessful.
Despite dismissing most of the claims, the judge has given the plaintiffs an additional 21 days to strengthen their case against Ilya Brusov, co-founder of Evercode Infinite and a shareholder in Atomic Wallet.
Brusov, like Sokolov, owns 12.8% of the company, while CEO Konstantin Gladyshev owns the remaining 74.4%. This gives the plaintiffs one last chance to refine their arguments and possibly keep Brusov in the lawsuit.
While the ruling is a significant legal victory for Atomic Wallet, the company continues to face reputational and operational challenges following the hack.
The affected users remain determined to recover their lost funds, exploring other legal options and avenues for redress.
The court’s dismissal of the lawsuit does not address the broader concerns about the hack or resolve the financial losses suffered by wallet users.
Atomic Wallet’s legal defense was based on the fact that its operations, conducted primarily digitally, were not targeted at any specific U.S. state, including Colorado.
For the plaintiffs, the court’s decision represents a step back in their quest for justice and compensation for the losses they suffered as a result of the hack.
However, the additional time granted to strengthen the claims against Brusov offers little way forward for the case.
