As the popularity of cryptocurrencies continues to mount, hacking and theft directed at individual cryptocurrency accounts and cryptocurrency exchanges has proliferated as well. See, e.g., CipherTrace, Cryptocurrency Anti-Money Laundering Report, 2019-Q2 (July 2019) (estimating approximately $4.26 billion in losses from cryptocurrency thefts, hacking, exit scams and other misappropriations in 2019). Surging cybercriminal activity in the cryptocurrency space has, not surprisingly, spurred a rise in litigation brought by cryptocurrency investors seeking redress for their lost funds and lost cryptocurrency tokens, including through claims that the negligence of others led to their losses.

While cryptocurrency technologies are still relatively new, the relevant legal principles for negligence claims are not. Two recent California federal court rulings indicate that the ability of negligence claims directed at cryptocurrency thefts to survive dismissal at the pleading stage will turn on the plaintiff’s ability to adequately plead the traditional elements of a negligence claim—duty, breach, causation and damages.

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