Virginia Man Sues Coinbase Over Unauthorized Crypto Transfers

On Tuesday, April 29, 2025, Yousof Sultan filed a complaint for declaratory relief in the US District Court for the Northern District of California against crypto exchange Coinbase, seeking to compel arbitration and address unauthorized cryptocurrency transfers from his account. The case was initiated by Sultan’s attorney, Nicholas Barthel of Barthel Legal, APC, and includes a demand for a jury trial.

According to the complaint, Sultan, a resident of Prince William County, Virginia, alleges that on or about March 4, 2024, unauthorized parties accessed his Coinbase account and transferred cryptocurrency valued at $9,420.14 without his permission. Sultan promptly notified Coinbase and provided supporting documentation, including a police report, but the company declined to reimburse the stolen funds. The complaint asserts claims under the Electronic Fund Transfer Act (EFTA), Virginia commercial law, negligence, breach of contract, and conversion.

The lawsuit centers on Coinbase’s User Agreement, which includes an arbitration clause requiring a “Formal Complaint Process” as a prerequisite to arbitration. This process is deemed complete when Coinbase responds to a complaint or after 45 business days, whichever occurs first. However, Sultan argues that the EFTA’s anti-waiver provisions render this pre-arbitration requirement void. A December 4, 2024, arbitrator ruling determined that a court, not an arbitrator, must decide whether the parties have met the conditions precedent to arbitration, leading to a stay in the arbitration proceedings pending the court’s determination.

The complaint invokes federal jurisdiction under 28 U.S.C. §§ 1331 and 2201, citing the EFTA and the Declaratory Judgment Act, as well as diversity jurisdiction under 28 U.S.C. § 1332(a), noting that the parties are citizens of different states and the amount in controversy exceeds $75,000, including treble damages and attorney’s fees. The court also has supplemental jurisdiction over Sultan’s state law claims under 28 U.S.C. § 1367. Venue is proper in the Northern District of California, as Coinbase’s principal place of business is in San Francisco, and significant events related to the claims occurred there.

Sultan’s causes of action include a request for an order compelling arbitration under the Federal Arbitration Act, arguing that the Formal Complaint Process is unenforceable under the EFTA. Additionally, he seeks declaratory relief under the Declaratory Judgment Act, asking the court to confirm that the EFTA applies to cryptocurrency accounts, that the unauthorized transfers qualify as electronic fund transfers under the EFTA, and that Coinbase’s pre-arbitration process violates federal law. A third cause of action under California’s Unfair Competition Law alleges that the Formal Complaint Process is an unfair and unlawful business practice, seeking a declaration of its unenforceability.

Sultan requests that the court compel arbitration of his EFTA claims, declare the applicability of the EFTA to his account, and rule that the unauthorized transfers are covered by the EFTA. He also seeks a ruling that Coinbase’s Formal Complaint Process is unenforceable under both federal and California law, allowing his claims to proceed to arbitration without fulfilling the condition precedent. Additionally, Sultan asks for attorney’s fees, costs, and any further relief the court deems appropriate.

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