In the past two years, plaintiffs from around the world have filed dozens of class-action lawsuits in U.S. federal and state courts contending that crypto token developers and platforms have sold unregistered securities in violation of the Securities Act of 1933. Defendants in these cases have successfully relied on applications of an array of Supreme Court and appellate court precedents to crypto trading to defeat claims at the pleading stage, generally before addressing the Howey test for whether a token is a security to which the Securities Act applies. SEC v. W.J. Howey Co., 328 U.S. 293, 298-99 (1946). Recent decisions demonstrate that defendants’ positions are especially strong—and generally insurmountable—if the crypto token developer or platform on which the plaintiff purchased is based abroad. But even cases that have stronger ties to the United States are subject to important limitations under the federal securities laws. Recognizing this, plaintiffs are increasingly focused on pleading claims specifically to surmount these challenges and token developers and platforms are increasingly focused on reducing their ties to the United States.

The ‘BProtocol’ Case and Decision

The current wave of crypto-securities suits began in early 2020. On April 3, 2020, plaintiffs’ firms filed 11 simultaneous suits in the Southern District of New York against seven crypto token developers and four crypto platforms. All suits alleged the same theory: that defendants owed damages or rescission to purchasers who bought crypto tokens, often long after initial offerings and on foreign platforms, because those tokens were unregistered securities.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]