A Malaysian individual was recently granted a substantial sum of nearly USD$ 150,000 in damages following a successful lawsuit against cryptocurrency investment firm Luno Malaysia Sdn. Bhd. The lawsuit alleged negligence on the part of the company, stemming from the purported unauthorised utilisation of over half a million ringgit from the individual’s Luno account in 2021 to purchase the digital currency Bitcoin.
Lawyer Ong Yu Jian informed that his client, Yew See Tak, alleged that Luno Malaysia had failed to adequately protect the cryptocurrencies held in his Luno account, resulting in a substantial loss of nearly USD$ 126,000 in cryptocurrency value. According to Ong, the Sessions Court judge, Sazlina Safie, delivered a verdict online, ruling in favor of Yew and finding Luno liable for negligence.
“The court’s decision included an order for the defendant to compensate the plaintiff in the amount of USD$ 125,323.84, along with an additional USD$ 20,959.97 awarded as exemplary damages,” Ong shared regarding the judgment.
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Luno Malaysia Prepares to File for an Appeal
Luno Malaysia will not be required to make an immediate payment of the court-ordered amount, which exceeds USD$ 146,090.97, to Yew. The company has secured a temporary suspension of the Sessions Court’s ruling. This interim stay, as revealed by Ong, extends for a period of 14 days. It remains in effect while Luno prepares to file an appeal at the High Court in response to the Sessions Court’s decision delivered yesterday.
Ong clarified that following the 14-day interim stay, his client will have the opportunity to request the awarded sum from Luno Malaysia. Yew was legally represented by Joshua Ho and Nurul Hanani Azamuddin, whereas Luno was represented by lawyers Muhammad Faisal Moideen, Maximilian Tai, and Clarence Tang. Ong emphasised the importance of the Sessions Court’s decision, stating, “This ruling underscores that cryptocurrency platforms can be held accountable if their customers’ accounts fall victim to scams or hacking incidents.”
“It is a very encouraging development in cryptocurrency law. If not wrong, this is the first decision of this kind in Malaysia against a cryptocurrency platform which is recognised by Securities Commission Malaysia. Hopefully, this leads to cryptocurrency platforms being much safer to use in the eyes of the public,” he said.
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What Is This Case All About?
As of August 17, 2022, a check on the Securities Commission Malaysia’s (SC) website revealed that Luno Malaysia Sdn Bhd is one of the five recognised market operators registered and authorised by the SC to operate digital asset exchanges in Malaysia. This indicates that Luno was among the entities authorised to provide digital asset exchange services in compliance with regulatory requirements in the country. Please note that regulatory statuses and authorisations can change over time, so it’s important to verify the latest information through official sources.
In his lawsuit, which was filed via a writ of summons at the Sessions Court in Petaling Jaya on August 25, 2021, Yew See Tak sought various court orders, including a declaration that he was not involved in the transactions that occurred on March 6, 2021, within his Luno Malaysia account. He also requested compensation in the form of special damages amounting to USD$ 125,323.84, general damages to be assessed, aggravated damages, and exemplary damages.
According to Yew’s statement of claim, he held a registered Luno Malaysia account with a Luno wallet for managing online funds and conducting cryptocurrency transactions. On March 6, 2021, he discovered that USD$ 118,753.03 in his Luno account had been used in three transactions to purchase 2.730096 Bitcoins (BTCs), which he described as unauthorised and illegal transactions.
What Transpired on Yew’s Luno Malaysia Account?
These newly acquired BTCs, along with an existing 0.15106083 BTC in his account, were subsequently transferred to an unknown account through further unauthorised transactions. Yew maintained that he had never authorised these transactions and that they occurred without his knowledge or approval. Based on the Bitcoin exchange rate at the time, the total value of the BTCs transferred out of his Luno account was USD$ 125,323.84.
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Yew alleged that Luno Malaysia was negligent for several reasons, including its failure to prevent the unauthorised transactions, exceeding the daily transaction limit, verifying the transactions with him, freezing the account despite suspicious activities, investigating and mitigating his losses, and detecting the potential for money laundering and reporting it to authorities, including the Securities Commission.
In response, Luno Malaysia denied Yew’s allegations and presented its version of the events. Luno claimed that Yew reported unauthorised access to his Luno wallet on the evening of March 6, 2021, not on March 7, as stated by Yew. They mentioned that Yew requested the withdrawal of approximately USD$ 118,633.41 to be suspended and for Luno to recover the funds. Luno locked Yew’s account on March 8, 2021, for security reasons and informed Yew on March 9, 2021, that the wallet had been accessed using Yew’s email and password, with all transactions authorised through Yew’s mobile phone.
Luno’s Counter Argument
Luno asserted that it does not have access to Yew’s Luno wallet, and he has sole control over his account’s access. They argued that Yew is responsible for maintaining the security of his devices and passwords. Luno stated that each of the transactions, which Yew claimed were unauthorised, were authorised by Yew according to Luno’s security features. According to Luno, they only owe a duty of care to ensure that transactions under Yew’s Luno account are duly authorised. They cited the standard terms of use that Yew accepted during the registration of his Luno account, stating that the company is not responsible for any losses or transactions resulting in losses to Yew.
Yew insisted that Luno is the custodian and trustee of his money and BTC, asserting that Luno still owed a duty of care and a fiduciary duty to block suspicious and fraudulent transactions and seek his confirmation before allowing any transactions. He contended that authorising a transaction carries the risk of unauthorised access by anyone with a device that can receive SMS prompts through the registered phone number and claimed not to have received or known about any SMS requesting authorisation for the alleged illegal transactions.
Yew denied authorising the transactions, stating that he only discovered them after his access to one of his online accounts was blocked due to an “SMS exceeding daily limit” message. He also pointed out that his Luno account was accessed via an unknown device not owned by him, and Luno failed to detect the unauthorised access.
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It’s worth noting that this case was decided without an oral hearing, and the court’s decision was based on the written submissions provided by both Yew and Luno.