As Crypto Values Drop, Lawsuits Go Up

Lawsuits over cryptocurrency losses are becoming more common as crypto continues to become mainstream, The Wall Street Journal reported Wednesday (June 1).

This began before the recent troubles with the coins, as the industry had already experienced numerous lawsuits — many of them fueled through investors alleging the coins were hyped and sold under false pretenses.

Some of them are proposed class-action suits, alleging that there had been pump-and-dump schemes involving celebrity promoters, while others have said the coins are unregistered securities and the issuers were deceitful. The report noted that overall, the lawsuits seem to show a trend of the industry’s troubles and successes.

One such lawsuit was in a California court and involved the losses over a stablecoin called GYEN, accusing issuer GMO-Z.com Trust Co. and Coinbase of advertising GYEN as being pegged to the Japanese yen and offering a reportedly safe investment.

However, the coin became untethered from the yen, making it spike in value but then drop 80% in one day.

Amid the torrents of lawsuits, the Journal wrote that Scott + Scott partner John Jasnoch said his firm was “bullish” on crypto and is now handling six cases about it, with more planned for the future. Some of his cases include investment losses in blockchain-based digital token SafeMoon, with the plaintiffs calling it a pump-and-dump scheme that used celebrities like boxer Jake Paul and musician Nick Carter to advertise it.

A lawyer for Carter reportedly denied his client was a promoter for the company, asking for the case to be dismissed.

PYMNTS wrote that regulators have been working on a legal framework that would offer clarity for companies and investors, with the Securities and Exchange Commission (SEC) and the Commodities and Futures Trading Commission (CFTC) being active in making proposals — though the jurisdictions are not clear.

See also: SEC, CFTC’s Crypto Aspirations To Be Tested by Courts, Lawmakers

Congress has said some courts might set boundaries. SEC Chair Gary Gensler previously said crypto products were subject to securities laws and have to “work within our securities regime,” though the statement may be outdated now.

He has also said legislators should give the SEC more power over crypto.