11 cryptocurrency firms hit with coordinated lawsuits
Allegations of illegal securities sales are visiting some of the biggest names in cryptocurrency.
Eleven class action lawsuits were filed against cryptocurrency companies on 3 April. The companies in the crosshairs include Binance, Civic, BPROTOCOL, Status, EOS parent company Block.one, KAYDEX, Quantstamp, BiBox, TRON Foundation, KuCoin and BitMEX.
Several of their principals were also named, including Brendan Blumer, Dan Larimer, Arthur Hayes and Changpeng Zhao.
When first spotted by Offshore Alert, the site described it as the cryptocurrency industry's Red Wedding, in reference to the Game of Thrones episode in which a partnership disintegrates after one of the partners is shown to be operating on outdated KYC information.
On the one hand, these lawsuits are not unusual. It's a running theme in the cryptocurrency space that as soon as a token loses enough value, disgruntled buyers start saying they should get their money back because they should not have been allowed to buy it in the first place.
On the other hand, this volley of lawsuits could be a biggie.
"My assessment at the outset is that the merits of these cases are non-trivial," writes Stephen Palley at The Block. "Time will tell, and it will take some time for them to be resolved, but that will certainly happen. This development, any event, will likely keep a large number of lawyers busy for years to come and could be a harbinger of similar lawsuits to come."
"Of course, it's hard to summarize 11 detailed complaints but the key issue at play is the nature of these tokens as securities and their availability for purchase to U.S. persons."
In the spotlight
Some of the companies named in the lawsuit stand out for different reasons. TRON could be one of the highlights because, according to the suit, its whitepaper explicitly claimed that TRX tokens are not a security, while Justin Sun repeatedly promoted TRON as being better than Ethereum.
Block.one's EOS may be in a similar boat. Like TRON, it advertised its token very heavily even without a working product and without the token really doing anything. EOS recently settled its illegal security sales allegations with the SEC for $24 million. That settlement is also mentioned in the suit against Block.one.
On the exchanges front, the allegations are also not entirely new.
Binance, KuCoin and many other exchanges have gone well out of their way to avoid serving US customers but still found themselves being named in these suits.
While the topics of these class action suits aren't entirely new, it's a sizable legal load which could help shape expectations of crypto companies going forwards.
It could take some months or even years though, and who knows where everyone involved will be that far down the line.
Disclosure: The author holds BNB and BTC at the time of writing.
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