In a notable legal development, a United States federal judge has dismissed a class-action lawsuit against Atomic Wallet, an Estonian cryptocurrency firm, due to insufficient jurisdictional grounds. The dismissal, ordered on September 10 by Colorado District Court Judge Philip Brimmer, marked a significant victory for Atomic Wallet and associated defendants amidst allegations stemming from a substantial $100 million hack.
The lawsuit originated from a group of users who entrusted their cryptocurrencies to Atomic Wallet. These users initiated legal action in August 2023 after the wallet provider was compromised in a hack that resulted in substantial financial losses. The plaintiffs sought to hold Atomic Wallet, its CEO Konstantin Gladyshev, shareholder Pavel Sokolov, and the software development company Evercode Infinite accountable for the security breach.
Judge Brimmer’s decision to dismiss the claims hinged on the argument that Atomic Wallet’s interactions with Colorado, the state where the lawsuit was filed, did not establish sufficient legal jurisdiction. The court scrutinized the firm’s ties to the U.S., which were minimal, as Atomic Wallet asserted it had “no US ties.” Notably, only one of the 21 plaintiffs, Graham Dickinson, resided in Colorado. The lawsuit had claimed jurisdiction based on the visibility of Atomic Wallet’s advertisements in Colorado, the availability of its mobile app in the state, and Dickinson’s interactions with customer service from within Colorado.
The Nature of Digital Products and Jurisdiction
In his ruling, Judge Brimmer pointed out the unique challenges of asserting jurisdiction over digital products such as software applications. He noted that unlike physical goods, which require shipping to a specific location, digital products like those offered by Atomic Wallet do not necessarily reveal the user’s location to the provider. This aspect of digital commerce played a crucial role in the court’s decision, as it underscored the difficulty of proving that Atomic Wallet deliberately targeted the Colorado market.
While the majority of the lawsuit was dismissed, Judge Brimmer granted the plaintiffs an additional 21 days to justify why the case against Ilia Brusov, another founder of Evercode Infinite and shareholder in Atomic Wallet, should not also be dismissed. This leaves a narrow window for the plaintiffs to amend their arguments and potentially salvage part of their case.
Ownership and Stakeholder Details
The court’s order revealed ownership stakes in Atomic Wallet: Ilia Brusov and Pavel Sokolov each hold a 12.8% share, whereas Konstantin Gladyshev owns the majority stake of 74.4%. This information provides insight into the governance structure of Atomic Wallet, which may influence future legal and operational strategies for the company.
This legal outcome not only affects the parties involved but also sets a precedent for how jurisdictional issues are handled in cases involving digital products and services in the cryptocurrency industry. The case highlights the complexities of regulating and litigating in a space where traditional boundaries are often blurred by the nature of the technology.
The dismissal of the lawsuit against Atomic Wallet underscores the legal intricacies of dealing with international digital service providers and the challenges plaintiffs face in proving jurisdiction. As the cryptocurrency industry continues to evolve, this case will likely serve as a reference point for future legal battles over digital asset security and consumer protection.
