A New York law firm last Friday filed class action suits against 11 well-known companies in the digital asset industry, claiming they sold unregistered securities to investors. The companies targeted include names like Binance, BitMEX, Block.one, Civic, and the Tron Foundation.
The suits focus on companies that participated in issuing or trading tokens associated with the initial coin offering (ICO) flurry of 2017-18. According to news site Decrypt, the timing is likely due to the two-year statute of limitations for fraud cases in the United States.
“Litigation boutique” firm Roche Cyrulnik Freedman LLP filed the suits against 42 defendants in various locations around the world. The firm’s partners have represented clients in a number of high-profile digital asset-related cases, most notably the estate of David Kleiman in the case against Dr. Craig Wright, in which the Kleiman family is seeking a share of Bitcoins allegedly mined by Wright before December 31st, 2011.
In February 2020, Roche Cyrulnik Freedman was also appointed interim lead counsel in a market manipulation case against exchange Bitfinex and “stablecoin” issuer Tether. That suit alleges Bitfinex and Tether coordinated to manipulate the BTC price by flooding the market with Tether assets (USDT) which traders had believed were backed 1:1 by a reserve of actual U.S. dollars.
The ICO Wild West was a minefield of pumps and legal risk
These latest lawsuits serve as an important reminder that the digital asset/blockchain industry is not the lawless free-for-all its advocates (and opportunists) once perceived it to be. Project organizers treated token sales as a way to raise capital outside the regulated initial public share offering (IPO) process. Meanwhile, asset exchanges capitalized on this trade by offering a wide range of tokens for sale and exchange on their platforms—taking fees on every trade and allegedly requesting millions of dollars in registration fees to have an asset listed.