A court in British Columbia has decided that a cryptocurrency exchange is not liable for a customer’s loss of C$671,000 (about US$480,000) due to an online scam, even after issuing multiple fraud warnings.
On Monday, BC Supreme Court Justice Lindsay LeBlanc released a statement dismissing the claim made by Victoria resident Yang Li Hsu against Calgary’s NDAX Canada. The judge determined that the exchange had fulfilled its obligations by alerting Mr. Hsu four times about the possible scam.
Though the loss was described as “unfortunate,” Justice LeBlanc stated that NDAX Canada bore “no liability,” highlighting the exchange’s registration as a money services business with the Financial Transactions and Reporting Analysis Center of Canada (FINTRAC).
The judge also mentioned that NDAX’s warning to Mr. Hsu was “crystal clear.”
In the details presented in court, Mr. Hsu, an accountant, opened an account with NDAX on April 10, 2023, after being convinced by an acquaintance to invest in a scheme promising daily returns of up to 1%. To fund this venture, he mortgaged his home, borrowed money from a friend, and deposited C$671,000 between April 11 and May 17, 2023, using those funds to buy Ethereum.
On April 18, an employee from NDAX reached out to Mr. Hsu for more details about a withdrawal request, explicitly cautioning that “there were elements of risk in this transaction” and that it would be sent for further review. That conversation was recorded and referenced in court, although specifics about the Ethereum transaction itself were not made public.
Following that call, Mr. Hsu sent multiple emails insisting that NDAX “proceed with the withdrawal without delay” and implied potential legal action if the company didn’t comply.
When Mr. Hsu attempted to transfer cryptocurrency to an outside wallet, NDAX issued several warnings. The exchange provided a written risk disclosure, a second confirmation notice, and two follow-up calls, one of which included a direct warning from compliance officer Julia Baranovskaya that Mr. Hsu was “likely to have been scammed.”
Despite these alerts, NDAX proceeded with the transaction, leading to the Ethereum being transferred to the fraudster’s wallet and subsequently lost.
Mr. Hsu’s lawsuit arrives at a time when Canada is intensifying its enforcement against cryptocurrency compliance issues.
Just recently, the country’s Financial Intelligence Unit imposed a record C$176.9 million fine on a Vancouver-based cryptocurrency platform for breaching anti-money laundering laws, citing thousands of unreported suspicious transactions involving child exploitation, ransomware, and sanctions evasion.
