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(Reuters) – Blockchain firm Block.one last summer after its proposed $27.5 million settlement against token holders’ class-action securities fraud claims was dismissed, halting the acquisition of the lawsuit by another plaintiff firm. has reached a new $22 million deal for investors – and this could prove to provide a template for future crypto class action settlements.
A new settlement proposed by the attorneys of Grant & Eisenhofer’s lead plaintiff excludes claims by investors who acquired tokens in foreign transactions. Investors who bought tokens on US cryptocurrency exchanges such as Coinbase, Kraken, Binance.US, Genesis, or traded in the US only will be part of his proposed $22 million settlement fund. eligible to receive the part.
A U.S. District Court refused to approve a proposed $27.5 million settlement last August on the grounds that this new limit does not distinguish between foreign and domestic transactions of Block.one EOS and ERC-20 tokens. It is intended to allay the concerns of Judge Louis Kaplan of
As you know, as Kaplan noted in his August decision, the U.S. Supreme Court ruled in Morrison v. National Australia Bank 2010 that U.S. securities law applies only to U.S. transactions. Davis Polk & Wardwell’s Block.one attorneys relied heavily on Morrison in the company’s motion to dismiss a class action lawsuit of token holders filed in November 2020. 2017 and when he raised $4 billion in a so-called Initial Coin Offering in 2018, Grant & Eisenhofer argued in its motion to dismiss that it failed to demonstrate that the lead plaintiff’s tokens were acquired in a domestic transaction. (Kaplan has not ruled on the motion to dismiss.)
Grant & Eisenhofer then submitted evidence that the lead plaintiff, a group of investors called Crypto Assets Opportunity Fund LLC, had made nearly half of the Block.one token trades on US crypto exchanges. But when Kaplan refused to approve the first proposed settlement last year, the judge said he was not convinced that crypto funds could adequately represent the interests of domestic investors. by Morrison.
Kaplan said in the August decision that the conflict within the class was structural and that Grant & Eisenhofer had done nothing wrong by agreeing to an agreement to indemnify both categories of plaintiffs. Nonetheless, Serendy Gay Ellsberg has called on Kaplan to replace Grant & Eisenhofer and its client, the Crypto Fund, as the lead in the class action lawsuit after the August ruling.
Selendy Gay, unlike G&E’s clients, said that its clients, retail investors, suffered almost all of their losses trading on the US Kraken exchange, thus compromising the interests of domestic investors to avoid gains outside the US. argued that there was no incentive to get trader. (Selendy Gay’s original offer included co-counsel for the company then known as Roche Freedman, but that company, now known as Freedman Normand Friedland, dropped the lawsuit last September. I did.)
Grant & Eisenhofer persuaded Kaplan that the company and its customers, although not all of the losses, ultimately suffered losses on domestic transactions, but represented the interests of token holders with viable claims. I was convinced that I was in the best position to
Serendy Gay’s Jordan Goldstein declined to comment when I asked by email if his client would contest the newly proposed settlement. Daniel Berger of Grant & Eisenhofer also declined to comment. G&E had proposed a $5.5 million fee in the original settlement, but did not specify a fee request in the new agreement. Even with a $22 million settlement, it would be (to my knowledge) the second largest recovery for a class of crypto token holders alleging securities fraud, after the $25 million settlement by the Tezos Foundation in 2020. will be
If Kaplan does end up approving the transaction, future crypto defendants and lead plaintiffs include investors with valid claims under Morrison, but whose claims are based on the 2010 decision. prohibited by the interpretation of (For some reason, there is still a gray area when it comes to exotic securities.)
In its decision to dismiss the original transaction last year, Kaplan distinguished between viable and inviable virtual currency transaction claims under the Second Federal Circuit’s post-Morrison test for domestic transactions. The best way to do that is to locate the first computer or blockchain node to verify the transfer of tokens from one owner to another. That verification is a moment of “irrevocable liability” for token purchases, the judge said.
However, in the newly proposed transaction, Block.one and the lead plaintiff came up with several different ways of defining a domestic transaction. The most obvious is the token trading that took place on the US cryptocurrency exchange. There is also a category that extends Kaplan’s proposal, defining EOS and ERC-20 token purchases as domestic transactions when verified by a US blockchain producer.America
As we have reported several times over the past few years, Morrison has become a major roadblock for crypto investors, and this is exactly what many crypto defendants intended. Block.one’s newly proposed settlement is clearly smaller than the original deal. But if it provides a framework for defining valid cryptocurrency claims under Morrison, it remains an important achievement for investors.
read more:
Will Binance class action lawsuit over Terra demise go to arbitration?
Crypto Investor Settlement with Block.one Killed by NY Judge
SEC Fines Blockchain Firm Block.one $24 Million
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