Crypto Client Sues Faegre Baker Daniels Over 2017 Advice
The Illinois lawsuit comes as Faegre Baker Daniels is putting the final touches on a planned merger with Drinker Biddle & Reath.
January 02, 2020 at 06:10 PM
3 minute read
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A pair of crypto-investment companies and their founder filed a legal malpractice lawsuit against Faegre Baker Daniels in Illinois on Tuesday, accusing the Am Law 100 law firm of providing "erroneous" and "inaccurate" advice that put them in hot water with securities regulators.
Chicago-based Faegre partner Jeffrey Blumberg allegedly told Crypto Assets Fund and its founder Timothy Enneking that the crypto assets they sought to offer investors were not securities, according to the six-page lawsuit filed by CAF and Enneking in Cook County Circuit Court.
As a result, they never registered with the U.S. Securities and Exchange Commission, which began investigating CAF after it raised $3.6 million from U.S. investors in late 2017, the suit asserts.
Faegre represented CAF for part of the SEC investigation, bringing on board Denver-based partner Michael MacPhail. But Faegre "provided inaccurate analysis and analysis and advice that resulted in damage to the plaintiffs," the complaint alleges.
Shortly after learning the SEC was intending to bring an enforcement action against them, the plaintiffs ditched Faegre in May 2018 and found new counsel. The plaintiffs settled with the SEC in September 2018, paying a $200,000 civil fine and being censured by the agency.
In announcing the settlement, the SEC said CAF and Enneking misrepresented the fund to investors that it was the "first regulated crypto asset fund in the United States" and had registered with the agency.
Although Blumberg and MacPhail are referenced in the lawsuit, Faegre is the only defendant. Neither Blumberg, MacPhail nor a Faegre representative responded to requests for comment as of press time.
Faegre announced last month that it plans to merge in February with Philadelphia-based Drinker Biddle & Reath to create an Am Law 50 firm with more than 1,300 lawyers and consultants across 22 locations in the U.S., U.K. and China. Representatives for Drinker did not immediately respond to requests for comment.
The plaintiffs' lawsuit alleges one count of legal malpractice and sustaining damages worth more than $75,000.
The plaintiffs are being represented by Mitchell Katten and Joshua Diller of Katten & Temple in Chicago and Jeffrey Goldberg, the principal of the Law Offices of Jeffrey N. Goldberg P.C. in Los Angeles.
Goldberg said they had no comment "other than to say that they look forward to the opportunity to present their legal malpractice claims against Faegre Baker Daniels before a jury in Cook County, Illinois."
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