The ruling, which went against Coinbase even though it did not control the user’s wallet, might establish a precedent for liabilities affecting companies providing self-custody tools, even if they are only involved as software providers.
Key Takeaways
A Brazil court ordered Coinbase to return $100K to a user after unauthorized wallet transactions occurred.Coinbase lost after failing to prove the user sent the funds or that basic wallet security existed.This decision sets a precedent, meaning wallet devs might next face strict liability for user security.The São Paulo State Court ordered Coinbase to return nearly $100K to a user who deposited these funds into the Coinbase wallet, citing the Customer Protection Code provisions, which place the burden of proof for any claim on the business providing the service.
Nonetheless, Coinbase failed to prove that the wallet holder did, in fact, initiate this transaction and was unable to demonstrate the existence of security measures to prevent this outcome.
This applies to Coinbase, which is a registered company in Brazil, Souza assessed.
The other argument is that technical documents don’t aid in these cases by themselves if companies fail to provide a thorough explanation, aiding courts in understanding them. Magistrate Ju Hyeon Lee criticized Coinbase on this matter.
As the amount presented by the user was not contested, Coinbase was ordered to return the entire amount plus the due legal interest.
