A recent ruling from a Massachusetts appellate panel highlights significant implications for customers engaging in cryptocurrency transactions and the responsibilities of financial institutions. On April 18, 2025, the court resolved a case that underscores the limitations of bank liability concerning unauthorized transactions involving digital currencies.
Crypto Transactions and Bank Responsibility
The case involved Lourenco Garcia, who lost $751,000 through a cryptocurrency scam perpetrated by CoinEgg, an online trading platform. Garcia utilized his accounts at Santander Bank to make multiple transfers and purchases, unaware that he was dealing with a fraudulent entity. His dispute centered on whether the bank should have intervened to prevent these transactions, given the high risks associated with cryptocurrency.
Garcia’s legal argument included claims of breach of contract, negligent misrepresentation, and violations of consumer protection laws in Massachusetts. He contended that the bank had a duty to recognize and halt the risky transactions he initiated. However, the court ruled that Santander’s internal policies did not mandate intervention under such circumstances.
Court Ruling and Consumer Protection
The appellate court emphasized that while banks may have the option to investigate questionable activities, they are not legally obligated to do so unless specified in their customer agreements or through state regulations. Furthermore, the court noted that Garcia himself approved all transactions in question, which significantly weakened his claims against the bank.
Despite his reliance on a statement from Santander’s website promising to contact customers about suspicious activities, the court concluded that this assurance did not impose a binding obligation on the bank. Garcia’s recourse ended when both the trial and appellate courts sided with Santander, marking a disappointing conclusion to his two-year pursuit of a refund.
Implications for Customers
This case serves as a crucial reminder for consumers about the risks associated with cryptocurrency investments. With increasing instances of scams in the crypto landscape, the ruling sends a clear message: banks will not serve as insurers against individual investment losses. It is imperative for customers to exercise due diligence and adopt robust fraud protection measures when transferring large sums of money to digital assets.
Overall, Garcia’s legal battle, which began with the filing of his complaint in October 2022, highlights the complexities of bank liability in the evolving world of cryptocurrency. The court’s decision, while lacking significant precedential weight, underscores the necessity of understanding the limitations of financial institutions when it comes to personal investment risks.
