ANALYTICS: New litigation in cryptocurrency

Once on the verge, cryptocurrencies are gaining in importance as a means of payment and thus follow legal disputes and regulations. Large companies, including Xbox, PayPal, CocaCola, Sotheby’s, Restaurant Brands International (the parent company of Burger King, Tim Hortons, and Popeyes), and Yum Brands (including: KFC, Pizza Hut, Taco Bell, and The Habit Burger Grill), to just To name a few, they now accept payments in cryptocurrencies, according to Business Insider. Others, like Starbucks, are considering accepting digital currencies as a viable payment option.

Cryptocurrency, as defined by Investopedia, is “a digital currency or virtual currency that is secured by cryptography”. Cryptocurrencies “are systems that enable secure online payments that are denominated in the form of virtual“ tokens ”that are represented by system-internal ledger entries.” In addition, many cryptocurrencies are decentralized networks based on blockchain technology distributed ledger enforced by a disparate network of computers. A key characteristic of cryptocurrencies is that they are generally not issued by any central authority, which theoretically makes them immune to government interference or manipulation. ”It is important to note that there are differences between cryptocurrencies and other virtual coins or tokens, such as explained by Cointelegraph.

Cryptocurrencies, virtual currencies and digital assets

There are different types of cryptocurrencies, such as Bitcoin, Ethereum, Tether, and XRP, among countless others. For example, Bitcoin, which was introduced in 2009, is the first blockchain-based cryptocurrency and the most popular and valuable according to Investopedia. Other alternative cryptocurrencies include: Litecoin, Peercoin, Namecoin and Ethereum (Dash, ZCash). While cryptocurrencies can potentially facilitate the transfer of funds between two parties without the need for a third party (e.g. a bank), the semi-anonymity of these types of currencies means that they can be a breeding ground for illegal activities, including money laundering and tax evasion transactions. In addition, the value of cryptocurrencies fluctuates greatly.

Cryptocurrencies like Bitcoin are not tied to any entity, making litigation difficult for them to pursue. For example, a docket alarm search for “Bitcoin” shows results for Bitcoin holders or for seized Bitcoins, but no Bitcoin entity as none exist. However, litigation can be pursued for a cryptocurrency like XRP that is tied to a company (Ripple).

Ripple Labs and XRP Digital Asset

Blockchain company Ripple Labs has faced numerous lawsuits since 2020, including actions by the Securities and Exchange Commission (SEC) for allegedly raising more than $ 1.3 billion through its unregistered digital securities offerings through its digital asset security called XRP would have. Ripple Labs has also faced various lawsuits from XRP buyers for alleged securities violations by the company.

As of January 2020, Ripple Labs has faced eight lawsuits, including the SEC lawsuit. Most of the lawsuits were filed in the Northern District of California, the Southern District of New York and the Middle District of Florida, among others. Five of the eight lawsuits concerned drop marks for securities, commodities, exchanges, and fraud and trademark cases. Ripple Labs is represented by King & Spalding LLP; Ross Pitcoff Law; Debevoise & Plimpton LLP, among others.

XRP II LLC is also involved in most of the lawsuits against Ripple Labs and is represented by the same attorney.


Tether (originally Realcoin) is a cryptocurrency issued by Tether Limited that is controlled by the owners of Bitfinex. In addition, the companies reached an agreement with the New York attorney general in February to pay $ 18.5 million to settle bogus financial claims.

Cryptocurrency mining

Bit digital

Bit Digital, a Bitcoin mining company, has faced three lawsuits since 2020, two of which occurred in January 2021 and one in March; all cases were filed under the New York South District security case type. For example, one of the lawsuits covered by Law Street Media was filed against the company by a security buyer on behalf of an alleged group of those who purchased Bit Digital securities alleging that Bit Digital was conducting a counterfeit cryptocurrency business, according to a report. Bit Digital is represented by Kagen, Caspersen & Bogart PLLC.

Cryptocurrency exchange platforms

Cryptocurrency exchanges are “platforms that facilitate the trading of cryptocurrencies for other assets, including digital and fiat currencies,” which, according to the Corporate Finance Institute, effectively act as intermediaries between buyers and sellers.

Coin base

Coinbase, which recently made its historic public debut valued at $ 99.6 billion, is the largest digital forex marketplace. Coinbase mainly faced legal disputes in early 2020 and towards the end of 2020 through spring 2021. Four of the 11 cases were in the Northern District of California and two in the District of Delaware, and the other lawsuits were filed in separate courts. The types of action include, but are not limited to, contractual disputes, shareholder actions, financial loss, civil law claims and patent actions. Law firms representing Coinbase include Stumphauzer Foslid Sloman Ross & Kolaya PLLC; Gibson, Dunn & Crutcher LLP; Potter Anderson & Corroon LLP; Cooley LLP; and DLA Piper, among others. Some lawsuits that mention Coinbase are procedural criminal cases or real judicial proceedings against Coinbase accounts.


The global cryptocurrency exchange Kraken, owned by Payward Inc., has faced few legal disputes since January 2020. The three lawsuits that were filed were in the Northern District of California, the Middle District of Florida, and the Southern District of New York. In addition, the types of lawsuits are categorized into fraud, civil rights (ADA), and legal actions. Payward Inc. is the defendant in two of the three lawsuits. Payward sued a former employee for alleged unlawful access and misappropriation of Payward’s confidential business information and trade secrets. Payward Inc., which operates as Kraken, is represented by Pierce Bainbridge PC, Kobre & Kim LLP; and Schlam Stone & Dolan LLP.


Binance has faced six lawsuits since 2020, most of which occurred in the second half of 2020. Three of the cases relate to property damage, one case of bodily harm, defamation and defamation (registered against Forbes Media) and another case of securities, commodities, exchanges. The lawsuits took place in the Northern District of California, the District of New Jersey and the Southern District of New York. Binance is the defendant in four of the five lawsuits. Binance was part of an influx of lawsuits against cryptocurrency platforms in April 2020. Binance is represented by Keesal Young & Logan; Paul Weiss Rifkind Wharton & Garrison LLP; Davis Polk & Wardwell LLP; and Walsh Pizzi O’Reilly Falanga LLP.

Government participation

The government has taken several initiatives to regulate and enforce cryptocurrencies and other digital assets in relation to these goods. For example, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) presented a proposal for a regulation for virtual currencies and digital assets in December 2020, following the Justice Department’s announcement in October 2020 for a framework for enforcing cryptocurrencies.

The CFTC launched a securities fraud lawsuit against Fintech Investment Group and Compcoin last April, alleging the companies made false promises regarding the returns on their trading algorithms.

The Securities and Exchange Commission (SEC) has filed various lawsuits and conducted investigations into cryptocurrencies. The litigation includes various lawsuits against Ripple Labs and Telegram, and a New York attorney general lawsuit against Coinseed for alleged circumvention of state and federal securities and commodity registration laws.

Meanwhile, the New York attorney general fined two cryptocurrency trading platforms, Bitfinex and Tether, asking them to stop trading with New York residents and pay $ 18.5 million in civil fines for their allegedly false financial claims.

What’s next?

Currently, most cryptocurrency-related litigation revolves around an Initial Coin Offering (ICO) or a securities issue, such as B. non-registration as a security, as well as issues related to cryptocurrency exchanges and mining companies. However, this is an emerging legal issue that is likely to generate more litigation as there are more state and federal regulations. In particular, there are questions about trade secrets, disclosures, market manipulation, contracts and taxes, among other things, that are likely to be litigated as cryptocurrency evolves and becomes more mainstream. Due to the digital nature of cryptocurrencies, a large-scale hack could also lead to legal disputes. Additionally, companies that accept and invest in cryptocurrencies could also face legal disputes, particularly from shareholders, as the volatility of cryptocurrencies can lead to corporate compliance issues with their fiduciary duties.

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