Noose tightens on dodgy exchanges

It’s hasn’t been a good year for shady cryptocurrency exchanges, but it’s shaping up to be a great one for legitimate digital asset customers.

A judge has dismissed an attempt by Kraken owner Payward Inc to sue a former employee who revealed the exchange’s physical address and accessed a company computer system after his employment had ended.

Nathan Peter Runyon allegedly disclosed the physical address of Payward and Karaken in a complaint he filed in a separate suit against Payward for wrongful termination. He was alleging he was terminated on account of his status as a veteran and a disabled person, and as retaliation for reporting other Payward employees for fraud.

Payward also complains that Runyon included old board meeting minutes in his pre-action demand letter to Payward in respect of the wrongful termination suit. Runyon is also accused of using a company-issued laptop after his employment had ended, violating the Computer Fraud and Abuse Act (CFAA), in the process of retrieving the meeting minutes.

On Tuesday, the court dismissed the suit against Runyon. In delivering the judgment, U.S. District Judge Maxine M Chesney said that Payward had not alleged any competitive advantage gained by competitors in learning their physical address and hadn’t alleged that Runyon was stealing board minutes to gain a competitive advantage or resulted in the loss required to invoke the CFAA.

The judge granted Payward leave to re-file the suit and address the deficiencies in its claim, but there’s no word yet on whether it intends to do so.

Authorities clamping down

It’s good news for Runyon, who doesn’t have to worry that his wrongful termination claim has cost him a counter-suit—at least for now. If it’s true that Runyon was fired in part because of him blowing the whistle on unscrupulous colleagues, it’s also good news for the digital asset community, which has suffered through too many illegitimate scam outfits posing as digital asset exchanges.

Thankfully, authorities around the world appear to be clamping down.

The international Financial Action Task Force (FATF) recently published a report outlining the money laundering risks created by belligerent exchanges. The report includes anonymized case studies, one of which highlights an exchange which has continually relocated in order to escape tightening anti-money laundering and know-your-customer laws.

That description has been speculated to be Binance, another exchange operator that is coming under increased legal scrutiny. Already mired in litigation, Binance was sued by the Japan’s Fisco exchange for the money laundering taking place on the platform.

Binance is far from the only organization who should be put on notice by the FATF report. Tether and Bitfinex are being investigated by the New York Attorney General in addition to being sued by its users for the market manipulation they are allegedly facilitating. BitMEX also faced legal action over similar allegations. They join a long list of digital asset exchanges and operators being scrutinized for severe financial impropriety, taking advantage of a developing industry and untold numbers of customers—and countries—looking to enter the digital asset eco system.

These exchanges will be far from the last to be exposed. Fortunately, the tracks are running out for such entities, and the community will be all better for it. Each new story of market manipulation or money laundering hurts the legitimate operators, who are losing out on new entrants to the digital asset ecosystem that will be deterred by what has become a minefield of criminal asset exchanges.

The sooner the scammers are gone, the better for everyone.

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