Crypto related lawsuits seem to have more than tripled, especially after the U. S. Securities and Exchange Commission began cracking down on the industry. A legal report, dated September 11, 2018, by analytics platform Lex Machina 2018 has shown a rise in litigation that is aimed at securities and cryptocurrencies. The 2018 Securities and Litigation Report has shown a growing trend with over 15,000 cases filed in federal district courts from 2009.
Crypto Market Suits at Their ATH
The report considered statistics collected regarding the first two quarters of 2018 and compared them with a similar period in 2017. Whereas there were only 15 cases filed against blockchain and Bitcoin related matters, the first six months of this year has seen a total of 45 cases.
Of great interest is the fact that just 18 months after Jay Clayton’s nomination as the chairperson of Securities and Exchange Commission (SEC), filings involving securities hit the peak of 2,622 cases, going up 60 percent compared to the preceding 18 months. A report in the national Law Journals stated:
“Securities lawsuits filed over crypto-currencies or Bitcoin have tripled so far this year as SEC chairman Jay Clayton announced a crackdown on that industry,[…] the SEC, which has vowed to scrutinize crypto-currencies and initial coin offerings, was responsible for 30% of the cases filed in 2018, that’s the second-most popular filer of such cases, topped only by the law firm Levi & Korsinsky.”
Several lawsuits that hit the headlines include the R3 Consortium vs. Ripple Labs that commenced last September following the breaking down of the partnership between Ripple and the blockchain startup with both sides pointing an accusing finger at the other for breaching the contract. Thankfully, both sides recently agreed to an out of court settlement, ending the multi-billion dollar court battle that involved 5 billion XRP tokens.
New Litigation Strategies Required
Another prominent case involved Bitconnect on suspicion it was a Ponzi scheme with Bitconnect agreeing to refund all outstanding loans. Bitconnect would later shut down in January following the issuing of a cease and desist order against it by North Carolina and Texas authorities. Litigation is likely to increase at a higher rate as the cryptocurrency industry is maturing fast as crypto adoption as a form of payment gathers steam or a treasure store. Lex Machina CEO Karl Harris added:
“The significant increase in case filings coupled with the higher rate of cases tossed out at the pleading stage should compel securities lawyers on both sides to leverage the data to inform and create new litigation strategies. Our Securities Litigation Report enables lawyers to respond quickly and confidently to these new developments.”