California Court Dismisses Crypto Lawsuit Against Binance.US for Lack of Jurisdiction

News | May 24, 2024 By:

On Monday, May 13, 2024, the United States District Court for the Northern District of California granted a motion to dismiss a lawsuit involving cryptocurrency exchange accounts. The presiding magistrate judge, Alex G. Tse, dismissed the case without prejudice, giving the plaintiff leave to amend his complaint within three weeks.

The lawsuit was filed by Long Quan, a resident of China, against BAM Trading Services, Inc., which does business as Binance.US. Quan claimed his account on the Binance.US exchange was frozen in August 2022 due to an investigation by the Los Angeles Sheriff’s Office. In his initial complaint, Quan alleged Binance.US did not respond to his inquiries about the frozen account until February 2023. He brought causes of action for conversion, breach of the implied covenant of good faith and fair dealing, and violation of California’s Unfair Competition Law against BAM Trading.

However, Judge Tse ruled the court lacked personal jurisdiction over BAM Trading, as the plaintiff failed to prove the company was incorporated in or had its principal place of business in California at the time of filing. The judge also noted BAM Trading provided evidence in an affidavit that it was based in Florida as of March 2023. Further, the plaintiff did not contest BAM Trading’s argument that he may have opened his exchange account with a separate entity, Binance.com, rather than the defendant.

In addition, Judge Tse found Quan did not state valid legal claims in his complaint. For the conversion claim, the plaintiff did not show he had ownership or a right to possess the cryptocurrency funds in the account. The economic loss rule also precluded a tort claim where a contract governed the dispute. For the implied covenant claim, Quan failed to attach or provide the terms of any applicable contract. And for the Unfair Competition Law claim, no allegations suggested any unlawful conduct occurred in California, where the law does not apply to non-residents’ claims involving out-of-state actions.

While dismissing the case, Judge Tse granted Quan a chance to file an amended complaint by May 27, 2024, to attempt to cure the jurisdictional and legal deficiencies. If no amended pleading is submitted, the dismissal will become final.

Please contact BlockTribune for access to a copy of this filing.