In an earlier post, we reported that Judge William Orrick of the Northern District of California had authorized service of process on Ooki DAO (a DAO is a decentralized autonomous organization) through a Help Chat Box on Ooki DAO’s website, with contemporaneous notice through an Online Forum linked through its website. In another post, we reported that the Judge Orrick subsequently required the CFTC also to serve process on two Token Holders once it was…
In an earlier post, we reported that a judge had authorized service of process on a DAO (decentralized autonomous organization) through a Help Chat Box on the DAO’s website, with contemporaneous notice through an Online Forum linked through its website. Four amici — venture capital firms Paradigm and Andreessen Horowitz, crypto legal consortium LeXpunK, and the DeFi Education Fund — sought reconsideration of that decision. On December 12, 2023, Judge William Orrick issued an order…
Kim Kardashian, Floyd Mayweather, Jr. and Paul Pierce are among the defendants being sued for their role in promoting EthereumMax (“EMAX”), a cryptocurrency project centered around the EthereumMax tokens, a blockchain-based digital asset. The Defendants moved to dismiss the lawsuit. In the decision granting the motion, the Court first noted that Private Securities Litigation Reform Act (“PSLRA”) likely barred the claim based on its excluding RICO claims. To his surprise, however, Defendants did not seek…
On November 18, 2022, the U.S. Securities and Exchange Commission issued an order instituting administrative proceedings against American CryptoFed DAO LLC (“American CryptoFed”), an issuer of digital assets, to determine whether a stop order should be issued denying or suspending the effective date of the registration of the Ducat and Locke tokens (the “Tokens”) under the Securities Act of 1933 (the “Securities Act”). The SEC’s Enforcement Division (“Enforcement”) alleges that American CryptoFed’s Form S-1 registration statement…
Nexo Financial LLC is a company that describes itself as a leading cryptocurrency institution offering a number of digital assets services through its website. It offered its customers, among other things, an Earn Interest Product, which allowed customers to lend certain digital assets in interest-bearing accounts. On December 1, 2021, the Consumer Financial Protection Bureau (“Bureau”) served Nexo with a civil investigative demand (“CID”) requiring that a representative of the company appear by videoconference for…
Potentially in connection with the recent events rocking the crypto industry, FINRA is conducting a new sweep on “Crypto Asset Communications” by broker-dealers. If they haven’t already received the request, broker-dealers with crypto-related affiliates likely will be contacted. Notably, this is the first announced sweep that FINRA has issued in over a year. This Crypto Asset sweep is not limited to communications about crypto assets that are “securities,” and it requests recent crypto asset communications over a…
On November 20, 2022, two Estonian citizens were arrested in Tallinn, Estonia on the basis of an indictment returned by a grand jury in the Western District of Washington. The indictment against Sergei Potapenko and Ivan Turõgin contains 18 criminal counts including: conspiracy, wire fraud, and conspiracy to commit money laundering. The two are alleged to have defrauded hundreds of thousands of would-be investors in a virtual currency bank as well as fraud in connection…
This post concerns a lawsuit brought by the United States Commodity Futures Trading Commission (CFTC). The complaint alleges that, from approximately June 1, 2019 to approximately August 23, 2021, bZeroX, LLC (bZeroX) designed, deployed, marketed, and made solicitations concerning a blockchain-based software protocol that accepted orders for and facilitated margined and leveraged retail commodity transactions (functioning similarly to a trading platform). This protocol (the bZx Protocol) permitted users to contribute margin (collateral) to open leveraged positions…
Early posts in this blog mentioned how former U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton famously told Congress in February 2018 that “I believe every ICO I’ve seen is a security.” His successor, current SEC Chairman Gary Gensler, has said on multiple occasions (for example, here) that he believes the vast majority of digital tokens are securities. In a decision issued on November 7, 2022, U.S. District Judge Paul J. Barbadoro held that…
On November 7, 2022, the US Attorney for the Southern District of New York announced that James Zhong (“Zhong”) plead guilty to one count of wire fraud for stealing over 50,000 Bitcoin (valued at the time of seizure at over USD 3.36 billion) from the now defunct Silk Road dark web marketplace. Zhong has not yet been sentenced but could face a maximum of 20 years in prison. This marks yet another major victory for…