Civil Claim 14643-04-18 Israminers v. Bank Igud: closure of a Bitcoin company's account set aside

Background and facts: Israminers v. Bank Igud

The details here are based on reports on ynet (in cooperation with the Psakdin website) and in Calcalist. The full text of the judgment was not found openly online. According to Calcalist, Judge Limor Bibi of the Tel Aviv District Court gave the judgment on March 17, 2019.

Israminers is a company engaged in Bitcoin mining. According to ynet, in April 2018 the company received a notice from Bank Igud (Union Bank) that its account was being closed, because it is engaged in mining digital currencies. Shortly before that, the bank refused to deposit into the account funds transferred to it by the company B2C from the sale of Bitcoin. According to Calcalist, this was the bank's branch in the Herzliya industrial zone. Bank Igud was later merged into Mizrahi Tefahot.

The parties' arguments

The company argued that the bank was unreasonably refusing to provide it with service. According to Calcalist, it argued that the bank cannot rely on its policy, because it was not updated every year with the Banking Supervision Department.

The bank argued that its decision was reasonable and justified. According to ynet, it relied on a blanket policy from 2014 not to manage accounts of customers engaged in digital currencies. It also argued that the company concealed its field of activity from it, and that it is exposed to the risk of breaching the laws on the prohibition of money laundering and terrorist financing.

What the court decided on the closure of a Bitcoin account at Bank Igud

According to the reports, the judge accepted the argument that the blanket policy was not approved by the Supervisor of Banks in the year the account was opened. It was held that the bank was required to update the policy every year, and did not do so apart from a notice from 2014. The judge noted that it is doubtful whether the Supervisor's silence amounts to approval of such a sweeping policy.

The judge added that an absolute prohibition on opening an account for customers engaged in digital currencies, miners or traders, is not reasonable in her view. Regarding the prohibition on money laundering, it was held that the bank must examine the particular customer before it. Mining coins is not problematic in itself.

However, it was held that there is merit in the bank's argument that depositing money from the sale of coins on a trading platform may put it at risk, because of the difficulty of tracing the path of the money. According to Calcalist, the judge found reasonable the bank's refusal to provide a service relating to receiving the funds.

The argument of a breakdown of trust was rejected, because it was not proven that the company deliberately concealed its activity. The result: the closure of the account was set aside, but the bank may refuse to deposit the conversion funds. According to ynet, the bank was ordered to pay costs of only NIS 2,600, because of the novelty of the issue and because the claim was allowed only in part.

What it means for Mizrahi Tefahot customers

The judgment distinguishes between a blanket refusal to provide a service and an examination of a particular transaction. According to the reports, a general policy that was not updated with the Supervisor is not enough to close an account. A later case on a similar subject appears on the page Class Action 24372-08-19: Mizrahi Tefahot and digital currency funds.

Sources

• ynet (in cooperation with Psakdin): A bank closed the account of a Bitcoin mining company, and was sued
• Calcalist: report on the judgment, March 17, 2019

Frequently asked questions about court rulings against Mizrahi Tefahot Bank

The full text was not found openly online

How to cite

Civil Claim 14643-04-18 (Israminers Ltd. v. Bank Igud (Union Bank) of Israel), Tel Aviv-Jaffa District Court, 17.03.2019. Source: Net HaMishpat (Israeli courts database), case Civil Claim 14643-04-18 (Israminers Ltd. v. Bank Igud (Union Bank) of Israel).