Current and Emerging Major Litigations in the Crypto Space

The crypto space is evolving rapidly, and with it, the legal challenges and risks that crypto businesses and investors face. In this blog post, we will explore some of the current and emerging litigation trends in the crypto space and provide some practical tips on how to prepare for them.

Current Litigation Trends

Some of the most common types of litigation that crypto businesses and investors encounter are:

Securities litigation: This involves claims that crypto tokens or platforms are securities that should have been registered with the relevant authorities, or that they violated securities laws or regulations. For example, the U.S. Securities and Exchange Commission (SEC) has sued several crypto projects, such as Telegram, Kik, Ripple, and Block.one, for allegedly conducting unregistered securities offerings. Similarly, class action lawsuits have been filed against crypto projects, such as Tezos, EOS, and BitConnect, for allegedly misleading investors or violating securities laws.

Consumer protection litigation: This involves claims that crypto businesses or platforms engaged in unfair, deceptive, or fraudulent practices that harmed consumers or users. For example, the U.S. Federal Trade Commission (FTC) has sued several crypto businesses, such as Butterfly Labs, CoinFlip, and BitClub Network, for allegedly defrauding consumers or failing to deliver on their promises. Likewise, class action lawsuits have been filed against crypto businesses, such as Coinbase, Kraken, and Bitfinex, for allegedly manipulating prices, freezing accounts, or mishandling user funds.

Regulatory enforcement litigation: This involves claims that crypto businesses or platforms violated regulatory rules or requirements that apply to their operations. For example, the U.S. Commodity Futures Trading Commission (CFTC) has sued several crypto businesses, such as BitMEX, Tether, and Bitfinex, for allegedly operating unregistered derivatives platforms or engaging in market manipulation. Similarly, the U.S. Department of Justice (DOJ) has prosecuted several crypto businesses or individuals, such as BTC-e, Liberty Reserve, and Silk Road, for allegedly facilitating money laundering, tax evasion, or other criminal activities.

Some of the emerging types of litigation that crypto businesses and investors may face in the future are:

Intellectual property litigation: This involves claims that crypto businesses or platforms infringed on the intellectual property rights of others. For example, patent lawsuits have been filed against crypto businesses or platforms, such as Coinbase, Bitmain, and ShapeShift, for allegedly using patented technologies or methods without authorization. Likewise, trademark lawsuits have been filed against crypto businesses or platforms, such as Bitcoin.com, Bitcoin Cash ABC, and Bitcoin SV, for allegedly confusing consumers or infringing on the trademarks of others.

Antitrust litigation: This involves claims that crypto businesses or platforms engaged in anti-competitive practices that harmed consumers or competitors. For example, antitrust lawsuits have been filed against crypto businesses or platforms, such as Bitmain, Bitcoin.com, and Kraken, for allegedly conspiring to manipulate the Bitcoin Cash network or market. Similarly, antitrust investigations have been launched by regulators against crypto businesses or platforms, such as Facebook’s Libra project and Apple’s App Store policies.

Privacy litigation: This involves claims that crypto businesses or platforms violated the privacy rights of consumers or users. For example, privacy lawsuits have been filed against crypto businesses or platforms, such as Robinhood and Ledger, for allegedly exposing user data or failing to protect user information.

Similarly, privacy regulations have been enacted or proposed by authorities such as the European Union’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), which impose strict obligations and penalties on how crypto businesses or platforms collect, use, and share user data. How to Prepare for Litigation Given the complex and dynamic nature of the crypto space, litigation is inevitable and unavoidable.

However, there are some steps that crypto businesses and investors can take to prepare for litigation and mitigate its impact:

Conduct due diligence: Before engaging in any crypto-related activity, such as launching a project, investing in a token, or using a platform, it is important to conduct thorough due diligence to understand the legal risks and implications involved. This may include researching the regulatory landscape, the market conditions, the technical aspects, and the reputation of the project, token, or platform. It may also include consulting with legal experts, accountants, or auditors to obtain professional advice or guidance.

Implement compliance measures: After conducting due diligence, it is essential to implement compliance measures to ensure that the crypto-related activity is in accordance with the applicable laws and regulations. This may include registering with the relevant authorities, obtaining licenses or permits, disclosing information to investors or users, implementing security protocols, or adopting best practices. It may also include monitoring the legal developments and updating the compliance measures as needed.

Prepare for litigation: In the event of litigation, it is crucial to prepare for it as soon as possible to avoid further damage or liability. This may include preserving evidence, identifying witnesses, hiring lawyers, or engaging in settlement negotiations. It may also include communicating with the media, the public, or the stakeholders to manage the reputation or expectations.

The crypto space is an exciting and innovative field that offers many opportunities and challenges. However, it also comes with many legal risks and uncertainties that can result in litigation. Therefore, it is important for crypto businesses and investors to be aware of the current and emerging litigation trends in the crypto space, and to prepare for them accordingly.