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11 Class Actions Claim Crypto-Asset Exchanges Violated Securities Laws

On Behalf of | Apr 9, 2020 | Blog, Securities Law

Enthusiasm for Bitcoin has factored largely in many decisions to invest in the cryptocurrency market.

But according to 11 class actions filed on April 3 in the Southern District of New York, four crypto-asset exchanges and seven digital token issuers took advantage of that enthusiasm by unlawfully issuing and selling billions of dollars of unregistered digital tokens.

The lawsuits claim that the issuers and exchanges failed to comply with state and federal securities laws.

A Question of Timing

Under the Securities Act, Investors have one year to bring a private cause of action for offers or sales of securities that are in violation of Section 5 of the Act. Generally, the clock for the statute of limitations starts ticking down from the time of the violation.

In this case, the Investors say they purchased the digital tokens from 2017 to the present, a timeframe that obviously spans more than a year from the date the lawsuits were filed (April 3, 2020).

However, the plaintiffs will almost certainly claim that the statute of limitations didn’t start to run until April 3, 2019, when the Securities and Exchange Commission (SEC) issued the “Framework for ‘Investment Contract’ Analysis of Digital Assets.”

The plaintiffs claim that prior to the release of the SEC’s report, “a reasonable investor would not have believed that these tokens were securities that should have been registered with the SEC,” and that “a reasonable investor would not have concluded that ERC-20 tokens were generally securities subject to the securities laws.”

That means the success of the investors’ class actions will likely depend on the question of when a reasonable investor would have known that the digital asset transactions were potentially securities transactions.

The crypto-currency exchanges named as defendants in the lawsuits are Bibox, BitMEX, Binance and KuCoin, while the digital token issuers named in the suits are Bancor,, Civic, Kybercoin, Quantstamp, Status and Tron.

If you or your firm has been accused of securities law violations, you should waste no time in contacting a lawyer with extensive experience in civil and criminal defense against such allegations. The securities law attorneys at Ford O’Brien Landy LLP represent clients in New York and Nationwide.

Source: Forbes, “Investors Allege Securities Violations In 11 Crypto Class Actions,” April 8, 2020

Source:, “Framework for ‘Investment Contract’ Analysis of Digital Assets” April 3, 2019