In Shirodkar v Coinbase Global Inc. et al, 2024 ONSC 1399, the Ontario Superior Court of Justice provides a review of jurisdictional challenges and the issue of forum non conveniens involving a cryptocurrency class action. The defendants, Coinbase Global, Inc., along with its affiliated entities (“Coinbase”), faced a class action lawsuit brought by a user of its online trading platform, Mr. Shirodkar, which Coinbase sought to dismiss due to a lack of jurisdiction.
Coinbase operates a platform for buying and selling digital assets, including cryptocurrency. Between October 2017 and January 2021, Mr. Shirodkar conducted transactions on the Coinbase platform while residing in France and later in Ontario. His complaint, in the form of a class proceeding, alleged that the crypto assets traded on the Coinbase platform should be classified as “securities” under the Securities Act, R.S.O. 1990, c. S. 5 and that Coinbase failed to abide by the disclosure requirements therein, posing a risk to Canadian investors.
Coinbase sought to dismiss the class action, arguing that the Court lacked jurisdiction to hear the matter, as well as for a permanent stay based on the principle of forum non conveniens. The plaintiff argued that the Court had jurisdiction based on “presence,” “consent,” or “assumed” jurisdiction.
The Court examined whether it had presence-based jurisdiction over Coinbase, ultimately concluding it had none since Coinbase did not carry on a business in Ontario at the relevant times. While Ontarians could access the Coinbase services virtually, Coinbase was not performing “some substantial aspect of its business undertakings” in the province at the time of the alleged violations.
The plaintiff argued that Coinbase consented to Ontario’s jurisdiction through its user agreements and dealings with securities regulators. However, the Court dismissed these claims, stating that the user agreement with Coinbase Canada (a Coinbase affiliate) did not bind Coinbase generally. Furthermore, any submission to Ontario’s jurisdiction “was neither retroactive nor retrospective” to cover the relevant period of the plaintiff’s transactions. The Court then applied the “real and substantial connection” test clarified in Club Resorts Ltd v Van Breda, [2012] 1 SCR 572, noting Mr. Shirodkar failed to demonstrate that Ontario was “substantially affected” by the actions of Coinbase, no more than other locals where transactions occurred.
The Court’s decision to stay the proceeding hinged on the fact Mr. Shirodkar conducted transactions while engaging with a Coinbase global affiliate. The Court held the plaintiff executed a user agreement with Coinbase Canada only after the alleged violations arose. Despite indicating Coinbase Canada conducted business in Ontario, the Court permanently stayed the proceeding.
Shirodkar v Coinbase Global Inc. et al highlights the significance of jurisdictional obstacles in today’s financial landscape. With close to 600 crypto and other trading platforms accessible on the internet, parties may consider seeking legal advice before participating in digital financial transactions to assess their avenues for seeking redress. This is due to the possible jurisdictional barriers to initiating legal proceedings, even if a party had access to a trading platform or website within a province at the time of a violation.
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