Unknown Fraudsters Set Up Fake Bitcoin Wallets, Stole Plaintiff's Funds, Alleges Suit
Unknown defendants John Does 1-10 conspired to create cryptocurrency wallets in plaintiff Damien Sabella’s name by transferring funds from his Coinbase account, and he's now unable to access those wallets, said Sabella’s Nov. 22 complaint (docket 2:23-cv-09907) in U.S. District Court for Central California in Los Angeles.
Sabella, a Los Angeles County resident, directed his financial adviser to open a Coinbase account in his name Aug. 9 for buying selling, transferring and storing cryptocurrency, the complaint said. At Sabella’s direction, the financial adviser made two transfers -- one for $25,000 and another for $909 -- to the new account. After the initial transfers were made, Sabella attempted to access his Coinbase account directly “but had issues verifying his account,” it said.
Two days later, Sabella was still having verification problems and couldn’t access his Coinbase account, the complaint said. As Sabella and the adviser tried to resolve the issues over the following week, they received communications from someone identifying himself as Ethan Price, purportedly from Coinbase. Price claimed to be from Coinbase’s marketing department and offered a promotion that would allow Sabella to receive credits to his Coinbase account; he offered “limited assistance and advice regarding the verification issues Plaintiff was experiencing,” it said. The financial adviser had a similar experience with a purported Coinbase employee, Michael Coleman.
When Sabella was able to access his account on Aug. 18, he transferred $975,000 to his account, bringing the total in his account to $1,000,909. Sabella “is informed and believes” that Price and Coleman posed as Coinbase employees as part of a scheme to gain access to Sabella’s account and convert his funds, alleged the complaint. As part of the scheme, Doe 1 and/or other defendants sent emails and texts to Sabella purporting to be from Coinbase. As a result of the communications, they were able to access Sabella’s email, cellphone and his Coinbase account, it said.
On Aug. 19, Sabella received a text about a limit order to buy 38.26 bitcoin having been canceled, but Sabella had not made nor authorized the purchase attempt, the complaint said. Later that day, $1,000,889 from Sabella’s account was successfully used to buy 38.24 bitcoin without his knowledge, consent or involvement, it said. The bitcoin was placed into three wallets on his account, which he had not authorized, the complaint said. Minutes later, a request was made to transfer the 38 bitcoin, valued at $992,945.22, to another Bitcoin wallet that Sabella believes is owned by Doe 1.
Several more transfers were made that day among various wallets, including one on the Binance.com cryptocurrency platform, the complaint said. At least some of Sabella’s bitcoin was converted into cash and transferred to a bank account, “the identity of which has not been ascertained,” it said. None of the transactions was made with Sabella’s consent, and he does not have access to wallets 1-13 on his bitcoin account nor to two Binance wallets to which transfers were made, it said.
Sabella asserts violation of the Computer Fraud and Abuse Act and conversion. He seeks compensatory, consequential and incidental damages, or statutory damages according to proof; preliminary and permanent injunctive relief, barring defendants from unauthorized transfer of his bitcoin to any other accounts not owned or controlled by him; imposition of a “constructive trust” to which the defendants hold for Sabella’s benefit all bitcoin that was wrongfully purchased with his funds and stolen from him; and all monies and assets purchased or acquired with the bitcoin stolen by defendants, the complaint said. He also seeks punitive and exemplary damages, an award of prejudgment interest and reasonable attorneys’ fees. The identity of Doe 1 will be revealed in discovery and updated in an amended complaint, it said.