Santander Wins Crypto Scam Lawsuit
Santander Bank Prevails in $751,000 Crypto Scam Lawsuit
A Massachusetts appellate court recently dismissed a lawsuit against Santander Bank, concluding a case where customer Lourenco Garcia sought $751,000 in compensation for losses incurred in a cryptocurrency scam. The court ruled that neither Santander's customer agreement nor Massachusetts state law mandates the bank to block or flag customer-authorized transfers, even in cases of suspected fraud.
The Case Details
Between December 2021 and January 2022, Garcia used his accounts to make debit card purchases and wire transfers totaling $751,000 to Metropolitan Commercial Bank of New York. These funds were subsequently used to purchase cryptocurrency on Crypto.com and a fraudulent platform, CoinEgg. Upon discovering CoinEgg was a scam, Garcia sued Santander for breach of contract, negligent misrepresentation, and violation of Massachusetts consumer protection law, arguing the bank should have identified and prevented the high-risk transactions.
The Court's Decision
The appeals court rejected Garcia's claims. The court cited Santander's customer agreement, which states the bank "may" intervene in suspicious transactions but doesn't create a legal obligation to do so. Furthermore, the court noted that state regulations do not impose a duty on banks to scrutinize every transaction for potential fraud. The court emphasized that Garcia authorized all transfers and only reported concerns after the loss.
Implications for Banks and Customers
While this unpublished decision has limited precedential weight, it underscores that banks are not insurers against personal investment losses. In the current environment of rising crypto scams and increasing regulatory scrutiny, financial institutions are likely to rely on precise contractual language to define their responsibilities. This case serves as a reminder for customers to exercise due diligence and implement robust fraud-protection measures, especially when dealing with substantial sums in high-risk digital assets.
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