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Financial Services Law Insights and Observations

District Court says tech company not liable for app in crypto theft

Courts Digital Assets Privacy, Cyber Risk & Data Security Class Action Cryptocurrency State Issues California Maryland


On September 2, the U.S. District Court for the Northern District of California granted a defendant California tech company’s motion to dismiss a putative class action filed by users who claimed their cryptocurrency was stolen after they downloaded a “phishing” program that posed as a legitimate digital wallet. Plaintiffs alleged that the illegitimate app (developed by a third-party and not the defendant) caused them to lose thousands of dollars in cryptocurrency. Claiming that the app was a spoofing and phishing program that obtained consumers’ cryptocurrency account information and routed that information to hackers’ personal accounts, plaintiffs sued, asserting claims under the federal Computer Fraud and Abuse Act, Electronic Communications Privacy Act, California Consumer Privacy Act, California’s Unfair Competition Law, California Consumer Privacy Act, California Consumer Legal Remedies Act, Maryland Wiretap and Electronic Surveillance Act, Maryland Personal Information Protection Act, and Maryland Consumer Protection Act. The defendant moved to dismiss, arguing that it was immune from liability under § 230(c)(1) of the Communications Decency Act. The court agreed with the defendant, ruling that it is granted protection under the Act because it qualifies as an “interactive computer service provider” within the meaning of the statute, is treated as a publisher, and provides information from another information content provider. “Here, plaintiffs’ computer fraud and privacy claims are based on [defendant’s] reproduction of an app [] intended for public consumption, via the App Store,” the court wrote. “But, as [defendant] notes, its review and authorization of the [] app for distribution on the App Store is inherently publishing activity.” Moreover, the court concluded that, among other things, the defendant’s liability provision contained within its terms, which states that it is not liable for conduct of a third party, is valid and enforceable.

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