Cryptocurrency companies face a steadily growing number of lawsuits, adding to a list of recent headaches for their industry. That list includes steep recent declines in investment value and a high probability of new government regulations in the near future.
Investor losses have led to a surge of new class actions and other suits filed against issuers, platforms, managers and even celebrity promoters.[1]
Many of the cases allege pump-and-dump schemes, in which company officials essentially artificially inflate their company’s market value, then cash out and leave investors holding the bag as prices plummet.
Others assert that the cryptocurrency issuers misled investors in other ways, such as through deceptive marketing. Still others involve claims that the company’s digital tokens are unregistered securities and violate Title 15 of the U.S. Code, Section 77e(c) — part of the Securities Act.
Many suits targeting crypto companies, or individuals associated with them, have either been dismissed on procedural grounds, voluntarily dismissed by the plaintiffs or settled in private. As a consequence, assessing the likelihood of success of pending or future claims of these types is extremely difficult.
What is clear, though, is that all of those categories of claims, and others, are ones to which the crypto industry has significant potential vulnerability. Here is a more detailed overview of the types of assertions and arguments most commonly being made by plaintiffs…
