Everscale Partner
American law firm Roche Cyrulnik Freedman on Friday filed a series of class action lawsuits against major representatives of the cryptocurrency industry, including Binance, Block.One, BitMEX and TRON. They are accused of tricking investors by illegally selling securities in the form of digital tokens. About this site Offshore Alert writes. In the publication, what is happening is called the “Red Wedding” – a reference to the series “Game of Thrones”, in one of the episodes of which the massacre at the wedding ceremony is described.
A total of 42 defendants from the British Virgin Islands, Cayman Islands, Seychelles, Malta, Canada, China, Estonia, Hong Kong, Israel, Japan, Singapore, South Africa, Switzerland, Taiwan, the USA and Vietnam are mentioned in the lawsuits.
Roche Cyrulnik Freedman is already familiar to participants in the cryptocurrency space. In October 2019, she filed a $ 1.4 trillion lawsuit against market manipulation against the Bitfinex exchange. In addition, she represents the Kleiman family in a lawsuit over a million bitcoins with Craig Wright.
In total, the District Court of the Southern District of New York received 11 lawsuits. All of them are united by a common argument: token issuers took advantage of a lack of understanding of the principles of cryptocurrency investors and illegally distributed securities among US citizens.
According to the plaintiffs, these companies presented their tokens as having practical value, which exempted them from registration requirements. Many of them compared tokens with bitcoin and ether, which also do not require registration as securities. Investors could not know that issuers should register their tokens with the US Securities and Exchange Commission (SEC), lawyers say.
In addition to the above companies, KuCoin, Quantstamp, Bibox, KayDex, Status, BProtocol and Civic, as well as individuals representing them, including Brendan Blamer, Dan Larimer, Vinnie Lingham and Changpen Zhao, appear in the lawsuits.
The plaintiffs claim that the tokens of these companies do not pass the Howie test, which is why they must be recognized as securities in accordance with US law. In particular, they point to such a key characteristic of an investment contract as investing in a single enterprise with reasonable expectations of profit from the actions of third parties. Persons associated with the promotion of such tokens were in a single enterprise and unequivocally allowed them to rely on future profits, they say.
Now investors want to receive compensation in the amount determined by the court.
The lawsuit against Binance
Binance is charged with selling 12 types of securities without a license, including EOS, Bancor (BNT) and Status (SNT).
“Binance and issuers illegally participated in millions of transactions, including raising, offering and selling securities, without registering them as such. Binance is not registered with the SEC as an exchange or broker-dealer, ”the lawsuit said.
The document considers each token in turn and explains why it is a security.
The lawsuit was filed on behalf of Binance users who purchased these tokens. The number of affected investors is measured by tens of thousands of people. Lawyers are demanding compensation for losses from the purchase of tokens on Binance over the past three years.
Lawsuit against TRON
The lawsuit against TRON said that the blockchain platform with offices in Singapore, San Francisco and Beijing, represented by defendants in the person of founder Justin Sun, CTO Zhiqiang Chen and Tron Foundation, from June 2017 to this day, “promoted, offered and sold TRON securities, called TRX tokens, in violation of US securities laws.
“Although TRX was a security, TRON did not register it as a security with the SEC and was not subject to an exception to the registration requirements,” lawyers say.
The TRON white paper explicitly states that “TRX is not a security”, which is why investors had every reason to believe that their issuance is not governed by US securities laws, they add.
Plaintiffs also point out that Sun promoted TRON as a comparable or better alternative to Ethereum. He repeatedly wrote on Twitter that TRON is better than ETH, which, unlike TRX, is not a security. Sun called himself the “Ethereum killer” and promised to “save” the Ethereum and EOS developers “from the collapse of their platforms.”
Plaintiffs want to return the money spent on the purchase of TRX, with interest.
The Lawsuit against Block.One
Block.One is accused of promoting, offering and selling US EOS tokens. The document refers to the company’s proceedings with the SEC, according to which $ 24 million was recovered from it.
Block.One Technical Director Dan Larimer promoted EOS at the Consensus conference in New York in May 2017. In addition, token ads were broadcast on billboards in Times Square.
The lawsuit was filed in the interests of investors who acquired EOS on ICOs and cryptocurrency exchanges.
The lawsuit against BitMEX
The lawsuit against BitMEX says that it was selling securities without proper registration as an exchange. In particular, we are talking about derivatives of EOS and SNT.
“BitMEX has been offering securities-based futures products using announcements distributed over the Internet throughout the world, including in the United States. Securities-based futures products were offered and sold to plaintiffs and the general public in the United States, ”lawyers say.
Unlike other companies, BitMEX is also accused of market manipulation. According to the plaintiffs, the exchange traded against its own customers through its trading division, the existence of which became known only in 2018.
During the collapse of Bitcoin prices in mid-March, BitMEX unexpectedly interrupted trading due to an alleged attack. “As a result of this break, BitMEX did not use its insurance fund, instead liquidating $ 800 million in high-margin positions of clients for its own benefit,” lawyers add.
