Massachusetts Court Upholds Santander Bank’s Dismissal of Cryptocurrency Scam Lawsuit by Lourenco Garcia

• A Massachusetts appeals court recently dismissed a lawsuit where Lourenco Garcia sought to recover $751,000 lost in a cryptocurrency scam, emphasizing the bank’s limited responsibility.

• In a significant ruling, the court found that Santander Bank had no legal obligation to intervene in Garcia’s authorized high-value crypto transactions, regardless of the ongoing fraud concerns.

• Notably, the court’s decision underscored that customer agreements and state laws do not obligate banks to stop or flag transactions initiated by customers.

This ruling highlights the need for personal diligence when investing in cryptocurrencies, as banks are not responsible for losses in customer-initiated transactions.

Santander Bank Wins a Rather Unconventional Crypto Lawsuit

The legal confrontation began when Garcia initiated two debit-card purchases and seven wire transfers from his Santander accounts between December 2021 and January 2022. These funds, totaling $751,000, were transferred to Metropolitan Commercial Bank of New York and subsequently used to acquire cryptocurrency on the platforms Crypto.com and CoinEgg. Unfortunately, Garcia later discovered that CoinEgg was a scam, leading to his significant financial loss.

In response, Garcia filed a lawsuit against Santander, citing claims of breach of contract, negligent misrepresentation, and violations of Massachusetts consumer-protection laws. His main argument was centered on the assertion that Santander should have identified and halted what he deemed high-risk transactions.

However, the Massachusetts appeals court refuted Garcia’s claims for multiple reasons. The customer agreement explicitly stated that Santander “may” choose to intervene when fraud is suspected but does not impose a legal obligation to do so. Furthermore, state regulators have not mandated that banks monitor every authorized transaction for potential fraud.

Garcia also pointed to a promise on Santander’s website suggesting that the bank would contact customers regarding suspicious activities. However, the court ruled that such a promise did not create a binding responsibility for the bank, especially since Garcia authorized all transactions without raising concerns until after the loss occurred.

While this unpublished decision may not set a strong legal precedent, it definitely hints at a critical takeaway: banks are not responsible for protecting customers from personal investment losses associated with cryptocurrency. This decision emerges amidst a growing wave of crypto scams and increasing regulatory scrutiny, highlighting the critical importance of precise contractual language in defining a bank’s responsibilities regarding customer transactions.

Ultimately, Garcia’s quest to reclaim his investment came to an unfortunate end after two years of litigation, having originally filed his complaint in October 2022. Both the Superior Court and the appellate court upheld Santander’s position, marking this case as a notable reminder concerning the liability limits of financial institutions in transactions involving crypto-assets.

Conclusion

This ruling serves as a pivotal lesson for cryptocurrency investors about the necessity of due diligence and protective measures against fraud. With the unfortunate conclusion of Garcia’s case, it becomes increasingly clear that banks will not serve as safety nets for individuals engaging in high-risk digital investments. Consequently, investors must exercise caution and remain vigilant in managing their cryptocurrency transactions.