Lawsuit Accuses Xapo, Indodax of Negligently Holding Stolen Bitcoin

A crypto trader is trying to seize nearly 500 bitcoin from Xapo and Indodax through a new lawsuit that accuses the two crypto exchanges of harboring his stolen funds.

Plaintiff Dennis Nowak, a German resident, and his counsel, longtime crypto lawyer David Silver, filed their demand for jury trial Monday in the U.S. District Court for the Northern District of California. They alleged the exchanges aided and abetted an unnamed thief who they claimed stole 500 bitcoin from Nowak and the exchanges remain in possession of the funds. 

The suit accused Xapo and Indodax of aiding and abetting unauthorized access of a computer in violation of federal code. It also alleged they unlawfully assisted that access and are in possession of stolen property, which are violations of California code.

The suit said Xapo and Indodax “knew” their know-your-customer and anti money laundering policies “were inadequate” and have permitted, “whether intentionally or not” criminal activity to persist. 

Xapo did not immediately respond to a request for comment.

Nowak sought the return of his “stolen personal property” and additional relief, according to the suit. His bitcoin was worth about $2,300,000 at the time of the theft, the suit said.

Nowak’s bitcoin appeared to have fled his account almost as soon as he had deposited it. According to the suit, Nowak deposited 500 btc at his unnamed U.S.-based exchange on Nov. 20, 2018. “John Doe” had taken all 500 of it by 4 p.m. on Nov. 23. 

Plaintiff claimed his bitcoin followed a handful of relatively transparent steps over to Xapo and Indodax. Investigations firm Kroll, who traced the bitcoin, found “no obvious attempts” to hide their path, according to the suit.  

The suit alleged that Xapo held 19.99 BTC and Indodax held 479.69 BTC of Nowak’s original 500.

Silver, the lawyer, declined to elaborate on the original hack beyond what is alleged in the suit. In an email statement he said the ensuing investigation related to his work representing victims of SIM swapping.