Marc Wites, of Wites & Kapetan and Scott Silver and David Silver of Silver Law Group. (Photo: Melanie Bell)
A group of investors alleging the CEO of a Delray Beach-based digital currency exchange absconded to China with $8 million dollars in clients’ money now have class certification to pursue their suit.
Former clients say businessman Paul Vernon fled the country with millions stolen from Cryptsy, an exchange that traded Bitcoin and other digital currencies. They received class certification after Vernon and Cryptsy failed to answer the lawsuit. They also successfully petitioned for a court-appointed trustee to track down Cryptsy’s holdings after Vernon reportedly shredded company files.
“We realized that one of the most important things early on would be finding the assets, so that they don’t disappear,” said class attorney Marc Wites of Wites & Kapetan in Lighthouse Point.
U.S. District Judge Kenneth Marra in West Palm Beach certified the class Aug. 24, allowing the suit by named plaintiffs Brandon Leidel and Michael Wilson alleging conversion, negligence, unjust enrichment, civil conspiracy, fraudulent conveyance and other charges.
No attorney filed to represent Vernon or his company, Project Investors Inc., which does business as Cryptsy.
The suit also names Vernon’s former spouse, Lorie Ann Nettles, as a defendant. It claims Vernon used money illegally transferred from Cryptsy clients to purchase a nearly $1.4 million Delray Beach mansion, later transferred to Nettles as part of a divorce settlement in December. Plaintiffs filed an injunction to stop Nettles from selling or encumbering the property.
Nettles’ attorney, Mark Levy of Brinkley Morgan in Fort Lauderdale, declined to comment.
Meanwhile, plaintiffs lawyer David Silver of Silver Law Group in Coral Springs says the house purchase was one of several fraudulent transfers by the CEO.
Silver has teamed up with his brother and law partner, Scott, as well as Wites, to represent potentially thousands of U.S. and international investors who traded on Cryptsy. They filed suit after plaintiffs claimed Vernon abruptly shut down the exchange and stopped responding to client inquiries in late 2015. Before that, Vernon had issued a notice informing users of software problems that required Cryptsy to pause all electronic wallets. In December, he then sent notice of an alleged phishing scam targeting the site.
In April, Marra signed an order naming Boca Raton attorney James Sallah of Sallah Astarita & Cox as court-appointed receiver.
Sallah launched a forensic analysis of Cryptsy’s digital records and filed a motion against Miami-based company Vault Networks, which hosted the firm’s servers. His reports claim Vernon liquidated company accounts in 2015 to purchase the Delray Beach mansion, a $100,000 diamond ring from jeweler Tiffany & Co. and an $82,000 Infiniti automobile. Sallah also alleges sabotage by Vernon or someone working with him to hinder investigations in the class action lawsuit.
“The receiver contends Mr. Vernon remotely logged into the database … and in three shred commands, destroyed the data,” said Sallah’s attorney, Patrick Rengstl of Payton & Rengstl in Miami. “It’s no coincidence that the receivership order gets signed, is served on Mr. Vernon and shortly thereafter, the database is destroyed.”
The receiver continues to hunt for the company’s electronic wallets and has since tracked digital currency with a market value of about $600,000.
“It’s a job in progress,” Rengstl said. “Our work is just beginning.”