Woman Repeatedly Warned by Canadian Exchange Not to Transfer Crypto, Gets Scammed Anyway

A British Columbia court has ruled that a crypto exchange is not to blame for a user’s loss of C$671,000 (US$480,000) due to an online scam, despite repeated warnings about the scam.

In writing judgment released Monday, BC Supreme Court Justice Lindsay LeBlanc dismissed a lawsuit filed by Victoria resident Yan Li Xu against Calgary-based crypto exchange NDAX Canada, finding that the platform met its obligations after warning it four times that it was likely to be scammed.

While Xu’s losses were “regrettable,” Judge LeBlanc “found no liability” with NDAX Canada, which she noted is registered as a money services firm with the Financial Transactions and Reports Analysis Center of Canada (FINTRAC).

The crypto exchange’s warnings to Xu “could not have been clearer,” Judge LeBlanc added.

Court facts established that Xu, who works as an accountant in Victoria, opened the NDAX account on April 10, 2023 after being persuaded by an online acquaintance to invest in a scheme promising returns of up to 1% per day.

To fund the investment, she re-mortgaged her home and borrowed money from a friend, then deposited C$671,000 into her account between April 11 and May 17, 2023, using the money to buy Ethereum.

On April 18 of the same year, an NDAX employee contacted Xu seeking additional information about the withdrawal and warned him that “the transaction exhibits risk factors” and would be forwarded for review.

The call, which was recorded, was later mentioned in court. The judgment did not disclose the details of the said Ethereum transaction.

After the call, Xu sent several emails to NDAX asking it to “proceed with the withdrawal without delay,” the ruling’s findings show. Xu’s tone later became increasingly insistent, and she warned that she could take legal action if the company did not comply.

When Xu tried to transfer crypto to an external wallet, NDAX issued a series of escalating warnings.

The crypto exchange provided a written risk disclosure, a secondary confirmation notice, and two follow-up phone calls, one of which specifically warned Julia Baranovska’s compliance officer that she had likely been “scammed.”

NDAX then processed her instructions and the Ethereum amounts were transferred to the fraudster’s wallet and lost.

Xu’s case comes as Canada ramps up enforcement on crypto-related non-compliance.

Earlier this week, the country’s financial intelligence agency imposed a record fine of C$176.9 million on a Vancouver-based crypto platform for violating anti-money laundering laws, citing thousands of unreported suspicious transactions related to child exploitation, ransomware and sanctions evasion.

To date, this fine is the largest ever imposed on a crypto company registered in Canada.

Decipher has reached out to the British Columbia court and NDAX Canada for further comment and possible details of the transaction. Efforts were made to reach Xu through her legal representatives.