Crypto in Court — Overview of the Biggest Lawsuits Worldwide

Over the last 24 months, all major legal systems have been floundering to develop a regulatory framework that can be applied across the blockchain industry. This lack of a standard foundation has led to the world watching current court cases within the crypto industry with extreme scrutiny, as these will likely provide a precedence to build future regulatory decisions upon.

Cointelegraph has covered many of these cases, with the most (in)famous one being the lawsuit against self-proclaimed Bitcoin creator Craig Wright. But what do all these cases suggest in regard to the overall sentiment toward crypto within the United States court system?

Recent cases in the U.S.

New York Office of the Attorney General v. Bitfinex

The New York Office of the Attorney General (OAG) is investigating the Bitfinex exchange over allegations of fraud and misleading investors. Prosecutors allege that the exchange and associated stablecoin firm, Tether, covered up an $850 million loss — and in doing so, misled investors. The latest in the case involved Justice Joel M. Cohen, a Supreme Court judge in New York County, who denied a motion to terminate the investigation by Bitfinex and Tether. In response, the companies said that they will appeal the decision.

Blockchain.com v. Paymium

Originally filed in September 2018, Blockchain.com filed documents claiming trademark infringement, unfair competition and false advertising by Paymium and its Blockchain.io platform. The New York Southern District Court denied motions by Paymium to dismiss the case. The court also found false statements regarding filings with the U.S. Securities and Exchange Commission (SEC) by Paymium.

Oracle v. CryptoOracle

Software giant Oracle has filed a lawsuit against blockchain startup CryptoOracle, with allegations of trademark infringement and cybersquatting, following publicity of the startup on CNBC. The complaint claims that the startup selected its name in order to trade on Oracle’s reputation. Oracle first attempted to resolve this outside of court with a cease-and-desist letter, but this resulted in the startup filing to trademark CryptoOracle.

Bradley Sostack v. Ripple

Bradley Sostack, an XRP investor, alleges in a class action lawsuit that Ripple misled investors and sold XRP as an unregistered security, in violation of federal law. Sostack’s latest filing was on Aug. 5, with Ripple being required to respond to this suit by mid-September 2019.

SEC v. Veritaseum

The U.S. SEC filed a complaint against Reginald Middleton, Veritaseum Inc. and Veritaseum LLC in relation to a fraudulent and unregistered initial coin offering (ICO). Of the $14.8 million raised, $8 million has recently been frozen by the U.S. Eastern District Court of New York.

Traders v. Coinbase

In March 2018, traders filed a case claiming Coinbase committed fraud, insider trading and market manipulation in relation to the Bitcoin Cash (BCH) markets. The claims of fraud have since been dismissed by U.S. District Judge Vince Chhabria of the Northern District of California. Should this case continue, traders will need to base claims on a negligence lawsuit.

Related: Coinbase Defends Against BCH Lawsuit From Users, Case Ongoing

Harrison Hines v. Joseph Lubin

Founder of ConsenSys-incubated startup Token Foundry, Harrison Hines alleges that his former business partner Joseph Lubin has breached contract and is suing for over $13 million. The documents were filed with the New York Supreme Court, claiming that Lubin has a connection with a breach of contract, conversion, quantum meruit, unjust enrichment, fraud, declaratory judgement and unpaid profits.

New Jersey v. Pocketinns Inc.

The state of New Jersey alleges that Pocketinns, a blockchain-driven online marketplace ecosystem, sold over $400,000 worth of unregistered securities to 217 investors. Poketinns intended to raise as much as $46 million in its token sale held in January 2018.

SEC v. Jon Montroll

Operator of the now-defunct Bitcoin exchange BitFunder, Jon Montroll, was accused of obstruction of justice during an investigation of the fake 6,000 BTC hack in 2013. Montroll pleaded guilty and has received a 14-month prison sentence, which is small compared with the 27- to 33-month sentence suggested by the prosecutor.

Department of Justice v. Blake Kantor

Kantor was the mastermind behind a cryptocurrency scam related to ATM coin between 2014 and 2017. In the court proceedings, he was found guilty, and was ordered to forfeit and pay over $2 million in addition to receiving an 86-month prison sentence.

Department of Justice v. hacking group “The Community”

The Community, a hacking group aged between 19 and 28, and is made up of five U.S. citizens and one Irish national, has received a 15-count indictment in relation to SIM swapping charges. It is alleged that the fraud resulted in $2.5 million worth of cryptocurrencies being stolen in seven attacks. The charges of conspiracy to commit wire fraud and wire fraud carries a maximum penalty of 20 years in prison each. The Irish man has been extradited to the U.S. to face charges.

SEC v. Daniel Pacheco

The SEC alleges that Pacheco operated a multimillion-dollar cryptocurrency pyramid scheme, Ipro Network, attracting over $26 million from investors from 2017 to 2018. It is further alleged that the defendant misappropriated investors' funds with the purchase of a $2.5 million home and a Rolls Royce automobile.

Commodity Futures Trading Commission v. Morgan Hunt and Kim Hecroft

The CFTC claimed that Hunt and Hecroft engaged in a fraudulent scheme to solicit Bitcoin from the public. In June 2019, a U.S. District Court for the Northern District or Texas found the pair guilty and ordered them to pay $400,000 in restitution, including a $180,0