Roche Freedman, the US-based law firm, filed a number of class-action lawsuits against some of the largest companies in the cryptocurrency space – including Binance, Block.one, Bitmex, Civic, and several more. According to the lawsuits, the companies defrauded consumers by issuing illegal securities in the form of digital tokens.
A total of 11 crypto companies were named in the lawsuit, including Binance, Civic, BProtocol, Status, Block.one, KayDex, Quantstamp, BiBox, TRON Foundation, KuCoin, HDR Global Trading (that is, the BitMEX exchange), as well as their bosses.
The suits were filed against 42 parties in 16 countries, including the British Virgin Islands, Canada, the Cayman Islands, China, Estonia, Hong Kong, Israel, Japan, Malta, Seychelles, Singapore, South Africa, Switzerland, Taiwan, US, and Vietnam.
Roche Freedman is the same law office that was involved in the Bitfinex market manipulation case in October 2019. It also assists the Kleiman estate in its billion-dollar legal battle against self-proclaimed Bitcoin creator Craig Wright.
All of the lawsuits accuse the crypto companies of exploiting the investors’ lack of knowledge and awareness of how digital currencies worked. The token issuers sold illicit securities to US investors, according to the lawsuit.
The law firm argues that the companies launched their tokens as so-called utility tokens, and it was not necessary to register them as securities, the token issuers claim. Several companies said their tokens were similar to Bitcoin and Ether, which also don’t belong to securities.
The law firm claims that it wasn’t obvious to the investors that these tokens had to be registered as securities.
“We are aware of the opportunistic complaints filed against several blockchain and cryptocurrency companies. We have not been served with any claims but are well prepared to address anything that may arise,” said Block.one spokesperson.
The plaintiffs involved in filing the lawsuits were Chase Williams, Alexander Clifford, William Zhang and Eric Lee.
However, many of the defendants are based outside of the United States, which means that the battle over jurisdiction will not be easy. This is because the tokens are considered securities and their availability for buy is to U.S. citizens.
Token issuers that are based outside of the US may argue that they are not proper parties because they ruled out US investors from their platforms.
According to the lawsuits, the crypto companies failed the Howey Test, which serves for deciding whether an asset is a security per the US federal law. Based on the test, a transaction qualifies as an investment contract when there is the investment of money in a common enterprise with a rational expectation of profits to be drawn.
One of the defendants is HDR Global Trading, which runs and owns the trading platform BitMex.
In the lawsuit against HDR Global Trading, the law firm says that “BitMEX offered these security futures products using statements posted on the Internet and distributed throughout the world, including throughout the United States, and the security futures products were offered and sold to Plaintiffs and the general public in the United States.”