Defendants in this case created a cryptocurrency called Alibabacoin and used the Alibaba name on its alibabacoinwallet.com websites, Facebook page, and phone applications. Online retailer Alibaba sued for infringement of its federally registered “Alibaba” mark. Despite finding it that there was subject matter jurisdiction under the Lanham Act (the US federal trademark statute), the court denied Alibaba’s motion for a preliminary injunction without prejudice to renewal upon a showing of personal jurisdiction. The court held…
The U.S. Securities and Exchange Commission obtained a court order freezing more than $27 million in trading proceeds from allegedly illegal distributions and sales of restricted shares of Longfin Corp. stock involving the company, its CEO, and three other affiliated individuals. According to a complaint unsealed last Friday in federal court in Manhattan, shortly after Longfin began trading on NASDAQ and announced the acquisition of a purported cryptocurrency business, its stock price rose dramatically and…
A class action lawsuit was brought today on behalf of investors in Nano f/k/a RaiBlocks (XRB), alleging, according to the plaintiffs’ lawyers, that Nano and key members of its core team violated federal securities laws and that, in their push to introduce XRB to a wide market of investors, recklessly directed investors to open accounts and place their assets with a little known, and severely troubled, Italian cryptocurrency exchange called BitGrail. On February 9, 2018,…
The U.S. Securities and Exchange Commission announced today that it charged two co-founders of a purported financial services start-up with orchestrating a fraudulent initial coin offering (ICO) that raised more than $32 million from thousands of investors last year. Criminal authorities separately charged and arrested both defendants. The SEC’s complaint alleges that Sohrab “Sam” Sharma and Robert Farkas, co-founders of Centra Tech., Inc., masterminded a fraudulent ICO in which Centra offered and sold unregistered investments…
The office of Massachusetts Secretary of State announced today that it had halted ICOs from five companies, claiming that the sale of digital tokens amounts to the unregistered offering of securities. Mattervest Inc, Pink Ribbon ICO, Across Platforms Inc, Sparkco Inc and 18 Moons were all ordered to stop sales of their coins. The firms, which were all either incorporated in Massachusetts or named the state as their principal place of business, were offering and…
At the request of the Federal Trade Commission, a federal court has halted the activities of four individuals who allegedly promoted deceptive money-making schemes involving cryptocurrencies. These schemes falsely promised that participants could earn large returns by paying cryptocurrency such as bitcoin or Litecoin to enroll in the schemes. The complaint was filed under seal on February 16 and announced today. It alleges that three defendants – Thomas Dluca, Louis Gatto, and Eric Pinkston –…
As early as September 2015, the CFTC took the position that virtual currencies such as Bitcoin are commodities. See In re Coinflip, Inc., No. 15-29 (C.F.T.C. Sep. 17, 2015). Based on that jurisdiction, in January, the CFTC brought a suit against Patrick K. McDonnell, of Staten Island, New York, and CabbageTech, Corp. d/b/a Coin Drop Markets (CDM). McDonnell brought a motion challenging the jurisdiction of the CFTC. In a decision yesterday, the district court held that,…
When traders want to purchase crypto using traditional currency, or exchange one cryptocurrency for another, they do so via an exchange. Coinbase is one of the world’s largest, with over 13 million users. Over the past few days it has been hit with two class action lawsuits, both in federal district court in California. The first an insider trading case. The suit claims Coinbase employees unfairly profited from the December listing of bitcoin cash. The…
We have reported in this space about how the SEC has indicated that most ICOs probably qualify as securities under U.S. law. see 1-3 and 1-23. One of the SEC’s first enforcement actions in this regard was against Maksim Zaslavskiy for his two initial coin offerings allegedly marketed through his companies REcoin and Diamond Reserve Club. That was followed by a criminal suit. Yesterday, Zaslavskiy sought to dismiss the criminal case, arguing that the cryptocurrencies…
The U.S. Securities and Exchange Commission today charged a former bitcoin-denominated platform and its operator with operating an unregistered securities exchange and defrauding users of that exchange. The SEC also charged the operator with making false and misleading statements in connection with an unregistered offering of securities. The SEC alleges that BitFunder and its founder Jon E. Montroll operated BitFunder as an unregistered online securities exchange and defrauded exchange users by misappropriating their bitcoins and…