After the same suits against Centra and Tezos, another initial coin offering which chose to remain unregistered with the SEC (Securities and Exchange Commission) is going through a class-action lawsuit claiming its cryptocurrency should be regarded as security.
On 21 December, a class action suit was filed by Raymond Balestra in New York’s Southern District against Edward Ng the CEO of ATBCoin LLC and Herbert W. Hoover, the co-founder.
The plaintiffs got a court jury trial and claimed that ATBCoin had breached the Securities Act by giving unregistered securities in anticipation of profit represented as ATB coin and keeping all the invested money that remained in trust, to benefit investors.
According to the complaint, ‘The securities’ offer and sale from ATB ICO was a transparent one. The reason for this, among other things (inter alia), is that Defendants peddled. The Plaintiff, as well as other investors of ATB ICO in all fairness, anticipated that the received ATB Coins in replacement of their investments would have a higher value compared to the BTC, ETH or LTC, or other invested currencies.’
Provided as a quick and affordable payment system that is block-chain based, the initial coin offering of ATB started on 12 June and will run up to 12 July, indicated a blog post. According to the plaintiffs, the offering continued efficiently up to September. It entered the second phase in August, and in September a press release said it was still available for investment.
On the blog for ATB, the firm declared that on 8 September, the sales closed and distribution would occur on 14 September. On 12 August 2.1 ETH was invested by the plaintiff (around $621.62 at that period) said Ethereum Price Tracker (CoinDesk’s).
The number of people who invested is unknown and so is the collected amount; however, the complaint approximated the sum to be around ‘between $20,400,000 and $24,210,000’ in either, Bitcoin and Litecoin. The case made the same accusations to the ones other investors had against different ICO projects like Centra Tech and Tezos where the same argument from plaintiffs was made that tokens provided by these ICOs need to be regarded as securities.
Also, legal experts contributed, disputing that personal grievance against initial coin offerings might compel the courts to specify which cryptocurrencies are believed to be securities before the SEC (Securities and Exchange Commission). Jim Lundy from Drinker Biddle, who is an expert of the SEC and a clients’ representative in cases of securities, informed CoinDesk that the complaint ‘follows a normal format of securities class action for a public offering.’ According to him, ‘This concept is that the product, ATB Coin is itself security.’
‘I am certain that the defendants will attempt to disregard that and judge shall need to rule.’ Crypto-economy participants have been waiting for more transparency from the SEC or the courts on which types of coins are securities under the law of the U.S. But, it is possible that reaching that ruling will take months. Another expert of SEC, Timothy Peterson, currently of Murphy & McGonigle concurred that a dismissal motion needs to come soon and added, ‘it is possible that the court will check the DAO report from SEC 21 (a) for direction. But, it is vital to know that the report of 21 (a) is not restrictive.’
It means the court can reach its conclusions regarding what is security and what is not security for federal securities law purposes.’ Peterson summarised: ‘I believe we can expect more of these grievances in coming times, particularly after courts start to create tests to determine how cryptocurrencies need to be examined or regulated. More facts should be revealed before it is reasonable to talk about the benefits of these specific accusations.’
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