COURT BARS CUSTOMER FROM SUING BROKER OVER LOST CRYPTO
New York’s top appellate court just slammed the door on a crypto trader’s last-ditch effort to pin trading losses on his broker. In a brisk March 27 ruling, the Second Department held that Regal Commodities owed no duty to customer Michael Tauber beyond executing his orders, even after his account was wiped out in volatile digital-asset markets. The decision tightens the legal perimeter around futures-commission merchants and signals that courts will treat crypto losses as trader, not broker, problems.
The fight began when Tauber accused Regal of allowing unauthorized trades and failing to stop him from self-destructing in a collapsing token. He sued for negligence, breach of fiduciary duty, and churning. Regal moved to dismiss, arguing that a standard brokerage agreement created no advisory or custodial obligations. The trial court agreed in part, but Tauber appealed, claiming industry custom and a “special relationship” should impose higher duties. The appellate bench rejected that view outright, ruling that the contract’s plain language controlled and that crypto’s novelty did not magically enlarge a broker’s legal responsibilities.
Who wins is straightforward: Regal keeps its defense costs down and its compliance manual unchanged. Tauber, and traders like him, absorb the market loss with no recourse to the middleman. The court made clear that unless a broker volunteers investment advice or discretionary control—neither of which appeared in the record—the trader alone decides when to press buy or sell. Nothing in the opinion expands or contracts SEC or CFTC reach; it simply refuses to judicially graft extra duties onto existing regulated entities.
In plain terms, the ruling cements the “execution-only” model for crypto brokerage accounts in New York. Customers cannot later claim the broker should have known better or intervened sooner. That reduces litigation risk for platforms and keeps compliance teams focused on KYC and margin rules rather than investment-suitability policing.
For the market, the decision tilts power toward exchanges and FCMs handling spot or derivatives crypto products. It lowers the threat of negligence suits that could chill order flow or force platforms to add costly human oversight layers. Decentralized protocols remain untouched, but any trader routing orders through a New York entity now has clearer notice that losses stay with the account holder.
Traders eyeing leverage in digital assets just got a blunt reminder: the broker’s job is transmission, not salvation.