Binance, Kucoin, Others Roped in US Manipulation Lawsuits

11 lawsuits have been filed against some crypto industry parties including Binance, KuCoin, Block.one (EOS), Tron Foundation (TRX)  in a New York federal court. Roche Cyrulnik Freedman LLP partnered Selendy & Gay PLLC to file the class actions in the Southern District of New York against four crypto-asset exchanges and seven major digital token issuers for allegedly offering and selling billions of dollars worth of unregistered digital tokens and other financial instruments to investors in violation of federal and state securities laws.

Others implicated in the case are Bibox, BitMEX, Bancor (BNT), Civic (CVC), Kybercoin (KNC), Quantstamp (QSP), and Status (SNT), in addition to many company executives. Citing the lawsuits as linked to the enthusiasm for Bitcoin and initial coin offerings (ICOs) that drew many investors to the space, Kyle Roche, a lead partner on the cases, said:

“The cases allege that exchanges and issuers failed to comply with federal and state securities laws intended to protect investors from unscrupulous behavior in the rush to capitalize on this enthusiasm.”

Last Friday, @RCFLLP and @SelendyGayLaw filed 11 class actions on behalf of investors against the world's largest crypto-asset exchanges and digital token issuers. Our statement:https://t.co/zmZlnZzbkW@VelvelFreedman @joemdelich @richardcipolla

— Kyle Roche (@KyleWRoche) April 6, 2020

The law firms currently represent a separate set of investors in another suit before the SDNY in which they allege that cryptocurrency exchange Bitfinex engaged in a market-manipulation scheme that cost investors hundreds of billions of dollars.

“When Roche Freedman filed the barrage of class action lawsuits over the weekend, it certainly caused a stir, alleging that some of the biggest crypto exchanges and token issuers in the world violated securities laws. This will no doubt play out for years in the courts,” says Alexander Blum, COO of Two Prime, a fintech company focused on the financial applications of crypto. He adds:

“The class action lawsuits will play out in one of two ways: One way is that since the cases will be determined by U.S. courts, it will force precedence on what constitutes as a securities offering, who is responsible for it, and under what jurisdiction. The lack of clear-cut rules can be frustrating from the entrepreneur’s perspective and hopefully, crypto companies will have more clearly defined rules about how to conduct themselves moving forward.
On the other hand, there are also companies that may not want to deal with the hassle of a lawsuit and may want to settle out of court. That is part of the bet the law firm is taking — that there may not be any legal decision, but the law firm will get a piece of the settlements. Whether these different exchanges or token issuers will choose to fight it or settle, it’ll depend on the company and their resources.”

It is immediately not clear what will happen in the case of the few firms implicated in the lawsuits which do not have or operate as legal entities in the U.S.. The likely outcome of the proceeding, whichever way it pans out, will set a precedent for the industry. Blum says:

“However, while some of the plaintiffs are U.S.-based firms, a number of them, such as Tron or KuCoin, are international groups with no legal entities in the U.S. For these groups, it’ll be interesting to see whether the U.S. courts will be able to enforce their decisions and how this all plays out.”

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