(Bloomberg) — Cryptocurrency broker Voyager Digital Ltd. is the target of a proposed class action lawsuit alleging the company misled customers by charging hidden fees on transactions.
Michael Legg, chief communications officer at Voyager, called the action “absolutely spurious and without any merit, whatsoever” in an email to Bloomberg News. “We look forward to dealing with this matter through the appropriate legal channels,” he said.
The lawsuit alleges that while Voyager advertises its trades as “100% commission-free”, there are “secret commissions” built into the pricing of every trade that “in most cases exceed the disclosed fees and commissions charged by its competitors.” The suit was filed on Dec. 24 in federal court in Miami.
The lawsuit is just one recent example of investors going after online brokers for money they claim to have lost as a result of what they consider to be deceptive business practices.
Robinhood Markets Inc. is facing a proposed class action lawsuit relating to so-called payment for order flow. The U.S. Securities and Exchange Commission accused the company of failing to properly inform customers that it sold their stock orders to Wall Street trading firms–a practice that, according to the regulator, led to client trades being executed at prices inferior to those of competing brokers.
Robinhood, which didn’t admit or deny the SEC’s claims, agreed to pay a $65 million fine to settle the charges in December 2020. That settlement didn’t include a restitution component, which would go to customers.
Mark Cassidy, the plaintiff in the Voyager case, said he started trading crypto on Robinhood but left the platform after the SEC’s allegations. He switched to Voyager, attracted by the promise of no-commission trades, but began to suspect something was amiss after noticing wide bid-ask spreads on transactions.
Cassidy, a 30-year-old who lives in Florida, found online reviews that speculated Voyager might be baking hidden fees into their process, contributing to wider spreads. “They’re basically ripping people off small pieces at a time,” he told Bloomberg News, adding that the experience turned him off of crypto investing generally.
The complaint against Voyager cites preliminary analyses conducted by two experts–Richard Sanders, the co-founder and lead investigator of CipherBlade, a blockchain forensics and cybercrime investigation firm, and Stephen Castell, chairman of U.K.-based Castell Consulting, which specializes in IT. Castell in his report predicted the total damages owed to the platform’s users may exceed $1 billion.
“What these experts have shown us is that Voyager is set up, in a way, like a carnival–every consumer is going to lose,” Adam Moskowitz, the attorney who filed the lawsuit, told Bloomberg News.
Moskowitz said that if Voyager agrees to injunctive changes to end their “unlawful practices” and provide adequate disclosures to investors within 75 days, his firm won’t seek any attorneys’ fees in the case.
The suit also mentioned the NBA’s Dallas Mavericks and the team’s billionaire owner Mark Cuban. According to the filing, Cuban’s support for and the Mavericks’ recent partnership with the crypto broker illustrate how Voyager is “targeting unsophisticated investors with false and misleading promises of reaping large profits in the cryptocurrency market.” The Mavericks declined to comment and Cuban didn’t return a request for comment.
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