Why I’m suing TD Canada Trust for 20.123 BTC

Because I sent them this letter and they never responded:

Dear Eric,

Unfortunately, the RCMP have closed my fraud case without laying charges. Therefore, I have no option but to ask TD Canada Trust for compensation for 20.123 bitcoins, currently equal to $12,074 CAD. If I am not compensated I will be forced to pursue compensation through legal channels.

The facts and precedents below make a clear case that my loss resulted from TD’s negligence.

Facts

In January 2015 I began conducting business as a bitcoin broker. I asked FINTRAC if I could register my company as a MSB and they said no. Fintrac said legislation was pending but in the mean time I was free to trade bitcoin for CAD and vice versa.

In March 2015, a new client, “Robert,” messaged me looking to buy bitcoin. Since he said he lived in White Rock, I agreed he could deposit cash into my TD Canada Trust chequing account. Over the next two days he deposited what I believed to be cash into my account, and I gave him control of the agreed amount of bitcoin. My online banking experience at the time looked like this:

The two bitcoin transactions are recorded on the blockchain with the following id’s: 8413c205e6f6861f7b5034f52a6ee04ae571847c00dc35ffe0e491261ef2e406 and c214086fcc9b21670466fbc2c1dfb99862d96142e01f08448a5d950ab0dc0ba1

Aware that TD Canada Trust was shutting down accounts belonging to bitcoiners in Vancouver, I opened an account at Vancity and asked Robert that he make his next deposit through Vancity. The next day (March 4) Vancity phoned me to report that someone had attempted to deposit a cheque into my account from an account which had no funds. Over the next few days the TD Canada Trust “deposits” were reversed:

It is clear that “Robert” committed fraud. I contacted the RCMP. On October 30th 2015, the RCMP “concluded” my case, unable to gather enough evidence to press charges.

How was TD negligent?

As my bank, TD has a duty to care for my interests. Two large cheques deposited into my account by a third party should have raised red flags (according to FINTRAC guidelines) and given TD a foreseeable risk of harm. TD should have notified me of this risk in a manner similar to that of Vancity.

To make matters worse, TD used misleading language in its online banking service to describe the entries in question. TD could have said “cheque”, “pending settlement”, “not cleared”, or other language reflective of the true nature of entry. Instead, it used the description of “deposit.” A rational actor would assume a deposit in a bank refers to money.

Precedents and Regulations

Two cases, which although not strictly on point, are instructive of how the issue of allegations of bank negligence should be viewed.

The first case is Semac Industries Ltd. v. 1131426 Ontario Ltd. 2001 CanLII 28375 (ON SC), 2001 CanLII 28375 (Ont. S.C.). In paragraph 68 of the judgment, the Court states:

If a bank knows of the customer’s fraud in the use of its facilities or has reasonable grounds for believing or is put on its inquiry and fails to make reasonable inquiry, the bank will be liable to those suffering a loss from the fraud. The bank should not be liable unless it is aware of the clear probability of fraud, that is the civil standard for finding fraud. A lesser standard would be unfair to the bank and possibly unfair to the customer.

[15] In the case at bar, the fraudster was obviously not a customer, but the decision does suggest, in my opinion, that if a bank knows of a fraud or has reasonable grounds for believing or is put on its inquiry that a fraud exists, the bank will be liable to those suffering a loss from the fraud.

The second case is that of Austral Imports Inc. v. Bank of Montreal, 2006 ABQB 428 (CanLII), 2006 ABQB 428 (CanLI). The case states in the judgment as follows:

“The relationship between a bank and its customer is governed mainly by contract. A bank must comply with any express contract provisions and, in addition, a bank owes its customer a duty to act with reasonable care and skill in carrying out its part of the contract. This duty is an implied term of the contract that governs the relationship between a banker and its customer: Claiborne Industries Ltd. v. NationalBank of Canada reflex, (1986), 1986 CanLII 2724 (ON SC)

  • TD’s Financial Service Terms make no claim of non-responsibility for negligence.
  • Examples of suspicious transactions according to FINTRAC: “Multiple deposits are made to a client’s account by third parties.” “Client deposits large endorsed cheques in the name of a third-party.”
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