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John Martin 23 Aug 2023 ◦ 6 min read

Big Lawsuits in Crypto Space

Big Lawsuits in Crypto Space

Lawyers are already actively participating in the legal formation of digital assets, and states are striving to take control of the new technology through crypto regulation and the introduction of new laws.

In this material, we will talk about high-profile lawsuits and legal disputes in the cryptocurrency world.

1. The Largest Lawsuit in Cryptocurrency History (Florida District Court)

The entire crypto community is actively following the Kleiman v. Wright hearing, which is directly related to the origins of Bitcoin.

In 2018, Ira Kleiman, the brother of one of the likely creators of the cryptocurrency, Dave Kleiman, filed a lawsuit after his death to return 1.1 million bitcoins. The accused of the theft was Craig Wright, who took part in the creation of the Bitcoin source code. He is also called the second applicant for the title of creator of electronic currency. Wright believes that the charges are based on a mixture of greed, rumors, contradictions, and speculation. The defendant is trying to prove the lack of direct physical access to the hard disk and the password of Kleiman's bitcoin wallet. The decision in this case may become a precedent in determining the ownership of cryptocurrency.

2. Lawsuit Over Developer Negligence (New York District Court)

70% of cryptocurrency exchanges are vulnerable and unsafe for users. The exchange BitGrail also fell into this number.

On April 5, a US citizen filed a lawsuit against the developers of the Nano cryptocurrency. Its representatives were Silver Miller Law Firm. The case is connected with a violation of the law on securities and negligence of developers, which led to the theft of 17 million Nano from the BitGrail exchange. The plaintiff demands to issue a new cryptocurrency and pay fair compensation to all victims. In turn, for Silver Miller, this is not the first large-scale lawsuit against cryptocurrency "instigators." For example, lawyers have already accompanied a class action lawsuit against the Tezos blockchain project, which raised a record $232 million with the help of ICO. The project was accused of violating securities laws and misleading investors. Silver Miller also dealt with lawsuits against cryptocurrency exchanges Coinbase, BitConnect, Monkey Capital, and Giga Watt.

Silver Miller has already teamed up with law firm Espen Enger — a representative of nearly 600 BitGrail victims — to help investors. However, it is not yet clear how the court will evaluate the claims of the plaintiffs. After all, Nano can be regarded as unregistered securities.

3. Countries Against Blocking Cryptocurrencies (New York District Court)

The ban on advertising cryptocurrency and ICO is a new trend among social networks. The Russian Association of Cryptocurrencies and Blockchain (RAKIB) initiated a lawsuit against Google, Twitter, Yandex, and Facebook in connection with this ban and restriction on the information of potential investors. It has already been supported by leaders of the world blockchain industry from Switzerland, Armenia, and Kazakhstan. A class action lawsuit was filed in New York on behalf of a new association — the Eurasian Cryptocurrency and Blockchain Association. We will find out a couple of months later what this idea will lead to.

4. Investor Class Action (California Supreme Court in San Mateo County)

The loss of funds to buy and sell Ripple (XRP) tokens — securities — forced American Ryan Coffey to go to court on behalf of all investors in the blockchain startup Ripple. At the beginning of 2018, he, like other co-investors, became the owner of Ripple tokens, the sale of which led to the loss of a third of the funds invested in cryptocurrency.

However, in response, they were told that counting user tokens is the prerogative of the US Securities and Exchange Commission. Experts say Ripple may also be unregistered securities. Most likely, Ripple will not be able to prove the opposite, and the project will be forced to return the money to digital assets investors.

5. Bitcoin as Property (Ninth Court of Appeal of Moscow)

Another precedent for legislation — in Russia they were allowed to recover cryptocurrency from debtors. As part of the bankruptcy of the defendant, the financial manager learned that the insolvent individual has a "virtual wallet" with bitcoins. The arbitration manager decided that cryptocurrency can be included in the bankruptcy estate. In turn, the debtor argued that Bitcoin assets cannot be taken into account when forming the bankruptcy estate due to the lack of legislative cryptocurrency regulation. Initially, the court decided not to include cryptocurrency in the bankruptcy estate. However, at a meeting in May, the court of appeal completely denied this decision.

There were a lot of discussions and disagreements around the case. Although most lawyers supported the idea of ​ ​ including cryptocurrency in the property list.

6. Telegram Blockchain Failed Launch 

In May, the founder of the messenger Telegram Pavel Durov announced the cessation of work on the Telegram Open Network blockchain platform and the return of 72% of their investments to investors. The businessman called the decision of the American court the main reason for the closure of the project. The court banned the issuance of Gram tokens, as it recognized them as securities, taking into account the expectations of investors from the sale of an asset in the secondary market.

Then the SEC fined Telegram $18.5 million, and the company returned more than $1.2 billion to ICO investors directly or in the form of loans. After that, one of the participants in the Telegram ICO, Vladimir Smerkis, pointed out that most TON investors are inclined to file a lawsuit against Pavel Durov since the number of losses of those who used the services of brokers and funds will exceed 28%. However, so far there has been no information about the lawsuits filed against the head of Telegram.

7. BitMEX and John McAfee Tax Fraud

Events that occurred at the beginning of the fourth quarter of 2020:

In early October, the owners of the second-largest crypto-derivative exchange BitMEX, including its founder and CEO Arthur Hayes, were under investigation. The U.S. Commodity Futures Trading Commission (CFTC) accuses them of serving an unregistered trading platform and violating CFTC rules, including those related to countering money laundering and identifying customers.

The US Department of Justice also accused Hayes, co-founders of Ben Delo and Samuel Reed of violating the bank secrecy law. Reed was arrested but went on bail of $5 million. The company later announced that Hayes was leaving the post of general director, Reed — a technical director, and Ben Delo also leaving the company. Head of Business Development Greg Dwyer went on vacation. The position of interim general director was taken by Vivien Khu.

On October 6, US authorities charged John McAfee, founder of antivirus company McAfee, with tax evasion. He was detained in Spain, now he faces extradition. In addition to tax evasion, he is also accused of intentionally failing to submit tax returns. On October 5, the SEC sued the businessman for promoting ICO on Twitter. The plaintiff emphasizes that Makafi misled investors. For each count, he faces a prison term of up to 5 years.

8. Coinbase Investigation

The US Securities and Exchange Commission has launched an investigation into the crypto exchange. The regulator believes that the company could trade unregistered securities

The U.S. Securities and Exchange Commission (SEC) is investigating the site for trading unregistered securities.

A Coinbase spokesman told Reuters that the company does not place securities on its platform. At the same time, the head of the legal department of crypto exchange, Paul Grewal, emphasized that she would cooperate with the SEC.

A former Coinbase employee was accused of insider trading. Also in the fraud case are his brother Nihil Wahi and acquaintance Samir Ramani, whom the US Department of Justice accused of making illegal transactions with at least 25 different cryptocurrencies totaling about $1.5 million.

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