Marc Wites, of Wites & Kapetan and Scott Silver and David Silver of Silver Law Group. (Photo: Melanie Bell)
There’s good news and bad for traders on a Delray Beach-based digital currency exchange, who feared the worst after the CEO Paul Vernon allegedly absconded to China with clients’ money.
The good news: A settlement worth more than $1 million ends part of a class action lawsuit against Project Investors Inc., doing business as Cryptsy.
The bad: It’s a fraction of the $8 million with which Vernon allegedly fled the country.
“A lot of people didn’t think we could recover a dollar on this,” said plaintiffs attorney David Silver of the Silver Law Group in Coral Springs. “Paul Vernon, to the best of my knowledge, has not returned to the United States since he went to China in early 2016.”
Attorneys suggest more litigation might be in the works against bankers, lawyers, accountants, liquidators, other exchanges and professionals who allegedly share liability for guiding Cryptsy trades.
Plaintiffs and court-appointed receiver James Sallah reached the seven-figure settlement Oct. 27 with Vernon’s former spouse, Lorie Ann Nettles.
“This is the first of several settlements we believe are in the foreseeable future,” Silver said. “The fact that the ex-wife settled validates the premise of our lawsuit.”
Nettles’ attorney, Mark Levy of Brinkley Morgan in Fort Lauderdale, declined to comment.
Named plaintiffs Brandon Leidel, Michael Wilson and Jinyao Liu, who has since exited the litigation, filed suit Jan. 13 in federal court in West Palm Beach against Cryptsy, Vernon and his estranged wife Lorie Ann Nettles. They claim fraud on the exchange that operates in a still largely mysterious world, trading digital currency such as Bitcoin.
They tapped Silver, his brother Scott, partner Jason Miller and Marc Wites of Wites & Kapetan in Lighthouse Point to handle the litigation.
The traders claimed they noticed intermittent problems with Cryptsy’s website in October 2015 and got a notice from the company the following month that software problems required it to pause all electronic wallets. By December, they claimed Vernon had ceased operations, shut down Cryptsy’s offices and stopped responding to inquiries after informing users of an alleged phishing scam targeting the site.
U.S. District Judge Kenneth Marra named Boca Raton attorney James Sallah of Sallah Astarita & Cox court-appointed receiver.
Sallah launched a forensic analysis of Cryptsy’s digital records and reported that Vernon liquidated company accounts in 2015 to purchase a $1.4 million Delray Beach mansion, a $100,000 diamond ring from jeweler Tiffany & Co. and a luxury Infiniti automobile. He also tracked digital currency with a market value of about $600,000.
Vernon transferred the mansion as part of a divorce settlement with Nettles, who will turn over the real estate, ring and car to resolve claims against her.
Marra ordered preliminary approval of the settlement and set a Nov. 22 status conference.