Atomic Wallet Lawsuit Dismissed: Federal Judge Cites Lack of Jurisdiction in $100M Hack Case

TLDR:

• Federal judge dismissed class-action lawsuit against Atomic Wallet due to lack of jurisdiction
• Court ruled insufficient connection between Atomic Wallet and Colorado
• Plaintiffs argued app availability and ads in Colorado established jurisdiction
• Judge rejected arguments, citing digital nature of products
• Plaintiffs given 21 days to strengthen case against shareholder Ilia Brusov

A federal judge has dismissed a class-action lawsuit against Atomic Wallet, the Estonian-based cryptocurrency wallet provider, in connection with a $100 million hack that occurred in June 2023.

The ruling, issued on September 10 by Colorado District Court Judge Philip Brimmer, determined that the court lacked jurisdiction over the case.

The lawsuit, filed by a group of users affected by the hack, named Atomic Wallet, its CEO Konstantin Gladyshev, shareholder Pavel Sokolov, and software development firm Evercode Infinite as defendants. The plaintiffs sought to hold these parties responsible for the substantial losses incurred during the security breach.

Judge Brimmer’s decision hinged on the insufficient connection between Atomic Wallet and the state of Colorado, where the lawsuit was filed.

The plaintiffs had argued that several factors established jurisdiction, including the availability of Atomic Wallet’s mobile app for download in Colorado, advertisements visible to Colorado residents on social media platforms like X (formerly Twitter), and regular communication between a Colorado-based plaintiff and Atomic Wallet’s customer service representatives.

However, the court found these arguments unconvincing. Judge Brimmer noted that the digital nature of Atomic Wallet’s products made it unlikely that the company had deliberately targeted the Colorado market.

Unlike physical goods that require shipping to specific locations, software applications can reach users globally without the provider knowing their exact locations.

Atomic Wallet had previously filed a motion to dismiss the lawsuit in November, asserting that it had “no US ties” and highlighting that only one of the 21 plaintiffs resided in Colorado.

The company’s defense strategy proved successful, with Judge Brimmer agreeing that the contact between Estonian-based Atomic Wallet and Colorado was insufficient to warrant the court’s involvement.

The ruling represents a significant legal victory for Atomic Wallet as it continues to navigate the aftermath of the June 2023 hack, which affected approximately 5,500 wallets.

However, the judge did offer the plaintiffs an additional 21 days to explain why the case against Ilia Brusov, one of the founders of Evercode Infinite and an Atomic Wallet shareholder, should not be dismissed.

Ownership details revealed in the court order show that Brusov and Sokolov each own a 12.8% stake in Atomic Wallet, while CEO Gladyshev holds the remaining 74.4%.

The dismissal of this class-action lawsuit does not mark the end of Atomic Wallet’s challenges related to the hack. Users affected by the security breach continue to seek ways to recover their lost funds, and the possibility of further legal action in other jurisdictions remains open.