As per the reports, the class action lawsuits filed at the Newyork federal court on 3 April were targeted against the best-known Crypto companies.
The 11 suits name several parties like Binance, KuCoin, BiBox, BitMEX, HDR Global Trading Limited, Block.one, Quantstamp, KayDex, Civic, BProtocol and Tron Foundation. The lawsuits argue that companies are eluding investors by selling unlawful securities without proper licensing in the form of digital tokens and market manipulation. It is also alleged that in order to ascertain their token sales, these exchanges have also hidden some parts of information from the investing parties. It also claims that token issuers have benefited from a lack of awareness and knowledge of how cryptocurrencies work, and alleged illegal securities have been sold to US residents.
And also claim that the token issuers took advantage of buyers lacking awareness and knowledge of how cryptocurrencies worked and alleged unlawful securities were sold to US residents. The suits argue that the companies have marketed their tokens as utility tokens and say that they were not required to register as securities. Some of the companies have compared their tokens with those of Bitcoin and Ether (the native token of Ethereum), which are not considered securities. The investors were not aware of the need to file these tokens with the US Securities and Exchange Commission.
The plaintiffs argue that tokens issued by the defendants fail to pass the Howey Test. The “Howey Test” is a test that the Supreme Court created to decide if certain transactions qualify as “investment contracts.” Simply put, The Howey Test determines that a transaction represents an investment contract if “a person invests his or her money in a common undertaking and expects profit only from the promoter’s or a third party’s efforts.
The 11 suits were filed on Friday by the New York “litigation boutique” company Roche Cyrulnik Freedman. Roche Cyrulnik Freedman was the same law firm behind Bitfinex’s market manipulation suit in October 2019 and Kleiman’s billion-dollar lawsuit against self-professed Bitcoin inventor Craig Wright.
Due to its location outside the United States, some non-US defendants would need to be represented by the Hague Convention. Also, owing to the COVID-19 pandemic many Asian and European nations are under complete lockdown, which would prolong the court proceedings.
