A U.S. District Court in Illinois has granted a brief stay in a lawsuit against cryptocurrency exchange Coinbase that alleges violations of Illinois' Biometric Information Privacy Act (BIPA). Judge Sharon Johnson Coleman of the Northern District of Illinois Eastern Division granted Coinbase's motion to stay the proceedings while awaiting a ruling from the U.S. Court of Appeals for the Seventh Circuit in a similar case. The Seventh Circuit is currently considering a case involving Nuance Communications supplying voice identification technology to Charles Schwab, and the ruling in that case could have implications for the Coinbase lawsuit.
The lawsuit against Coinbase, initially filed in May, claims that the exchange's "wholesale collection" of faceprints for its Know Your Customer (KYC) requirements violated Illinois law because users were not properly notified. The plaintiffs, a group of Coinbase users, also allege that the exchange shared their biometric data without their consent to third-party verification providers, which constitutes another violation of the law.
Judge Coleman stated that the stay would simplify the issues, streamline the trial, and reduce the burden of litigation on the court and the parties involved. She also noted that the stay would not unduly prejudice or tactically disadvantage the plaintiffs.
Illinois' BIPA imposes strict requirements on private entities that collect and use biometric data. Under the law, companies must provide notice to individuals before collecting their biometric data, obtain their consent, and inform them of the purpose and length of time for which the data will be stored. The law also restricts companies from disclosing biometric data to third parties without consent. Companies that violate BIPA in a "reckless" or "intentional" manner may be required to pay damages up to $5,000 for each violation, while negligent violations can result in damages of $1,000 per instance. The plaintiffs in the Coinbase lawsuit are seeking these damages, as well as relief for litigation expenses.
Coinbase sought the stay in the biometric data case, anticipating the Seventh Circuit's ruling in the Nuance Communications case could set a precedent for how BIPA applies to financial services firms.
Coinbase is also facing scrutiny regarding data security. In May, the company disclosed that some customer support contractors, based in India, had accessed account data of users in exchange for bribes. The contractors were subsequently fired. The individuals responsible for the data breach reportedly attempted to extort $20 million worth of Bitcoin from the exchange. This incident has led to separate lawsuits against Coinbase alleging mishandling of customer data. The Illinois case adds to Coinbase's ongoing legal battles as it faces scrutiny from regulators and courts over privacy, compliance, and security practices in the U.S.
