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Rider v. Uphold HQ Inc.

657 F. Supp. 3d 491 (2023)

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Rider v. Uphold HQ Inc.

United States District Court for the Southern District of New York
657 F. Supp. 3d 491 (2023)

Facts

Uphold HQ Inc. (Uphold) (defendant) operated a cryptocurrency-exchange platform that maintained customer accounts and allowed users to transfer, purchase, trade, hold, and sell various cryptocurrencies. When creating an account, users were required to set up two-factor authentication (2FA), which was intended to provide an additional layer of security by requiring verification on a registered device during sign-in. A putative nationwide class of current and former Uphold users (customers) (plaintiffs) brought suit against Uphold, alleging that Uphold failed to implement its 2FA system correctly, thereby allowing unauthorized actors to reassign a user’s 2FA device using only the user’s email and password, without verification through the original device. The customers further alleged that Uphold and its former CEO misrepresented the company’s security protocols and responsiveness. The customers asserted causes of action under both federal and state law, including a claim under the Electronic Fund Transfer Act (EFTA). Uphold moved to dismiss all claims, including the EFTA claim, arguing that the EFTA applied, by its terms, to transfers of “funds” and that cryptocurrency did not constitute funds.

Rule of Law

Issue

Holding and Reasoning (Cote, J.)

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