- A Californian judge refused to dismiss a class action lawsuit against Ripple.
- Actor Steven Seagal incurred a $300,000 SEC fine due to his role as the brand ambassador for unregistered security Bitcoiin2Gen.
- Crypto company London Football Exchange's deal to buy a stake in Australian soccer team Perth Glory FC fell through, spectacularly.
Allegations of scams, lies, and hacks clogged up the newswire this week: a Californian judge refused to dismiss a class action lawsuit that could crash the crypto market; a crypto deal to buy a soccer club went sour; and actor Steven Seagal had to return over $300,000 for shilling the wrong platform. Crypto, never stop being crypto!
Ripple’s disgruntled investors
Imagine you’ve created the third largest cryptocurrency on the market. Imagine you work for Ripple Labs. Imagine your name is Brad Garlinghouse. Imagine you are Brad Garlinghouse, facing up to a terrifying possibility: that a lawsuit against your company threatens to crash the whole cryptocurrency market, with your name going down in history as the aggressor, and the dregs of Twitter’s crypto scene the victors.
Ripple asked US District Judge Phyllis Hamilton, who presides over Oakland, California, to dismiss a case in which unhappy investors claim that Ripple tricked them out of their money, and ran an unregistered securities sale for its token, XRP. Ripple’s counsel asked Judge Hamilton to throw out the case on the basis that the token sale for XRP was over five years ago, and so it was no longer relevant. Besides, it’d crash the market, it said.
On Wednesday, Judge Hamilton refused to dismiss the case. And though she invited the plaintiffs to amend their claims that Ripple misled them, the rest of her arguments appeared to assume that XRP was, indeed, a security, according to the Howey test—the decades-old measuring spoon to determine whether or not an asset is a security.
That’s what Jason Gottlieb, a partner of Morrison Cohen LLP who’s experienced in crypto litigation, told Decrypt. Judge Hamilton referred to a statute of limitations issue under the Private Securities Litigation Reform Act, “which would only apply if XRP were a security,” Gottlieb said.
Judge Hamilton also evaluated whether Ripple was a “seller” under securities laws, as well as liability issues under federal securities laws. “You wouldn’t be looking at those unless you had determined, for the purposes of this motion, that XRP is a security,” Gottlieb told Decrypt.
And if the court determines that XRP is a security (which previous courts have kinda assumed is the case, at least at this stage in various lawsuits), that means that XRP is an unregistered security. This would spell doom (d, o, o, m) and gloom (g, l, o, o, m) for XRP. They’d have to give investors their money back, and potentially cease trading of the coin altogether. Snap out of it, Brad!
Zen Master Loses his Calm
Actor, martial artist and one-time crypto publicist Steven Seagal found himself on deadly ground this week, as the SEC fined him over $300,000. Discovering that he wasn’t above the law, Seagal incurred the fine due to his role as the brand ambassador of Bitcoiin2Gen, an abandoned utility coin that’s being chased up for running an unregistered securities sale (there’s a theme here!).
Seagal agreed to be named on press releases as such and also hyped up the coin on his social media. For his foolishness, the US Securities and Exchange Commission has demanded he cough up $157,000 in disgorgement (the amount he received from Bitcoiin2Gen) and a $157,000 fine to the SEC. He’s also not allowed to push any other unregistered securities for the time being.
That suggests that Seagal got far less than he was originally promised for the project: Bitcoiin2Gen promised him $250,000 in cash and $750,000 worth of its token, B2G. But the token’s now marked for death, with the price sitting at $0.00017770, and trades around $50 a day. If Seagal had HODLed all his tokens, and the tokens he held were still worth a total of $750,000, it’d take him 41 years to get his money back, all else being equal.
Of course, arguments of ceteris paribus fly out the window with crypto; Seagal’s money is forever out of reach, so he got screwed at both ends. But even worse is the press release that Bitcoiin2Gen paid that kingly sum for. Read this:
“As a Buddhist, Zen teacher, and healer, Steven lives by the principles that the development of the physical self is essential to protect the spiritual man. He believes that what he does in his life is about leading people into contemplation to wake them up and enlighten them in some manner.”
“These are precisely the objectives of the Bitcoiin2Gen to empower the community by providing a decentralized P2P payment system with its own wallet, mining ecosystem and robust blockchain platform without the need of any third party.”
Even delivered with maximum conviction, it’s utter drivel.
Crypto hasn’t bought a soccer team, after all
Jim Aylward, CEO of London Football Exchange, no longer returns my calls or my messages. Just a few weeks ago, he proudly told me that he’d just bought an 80% stake in a soccer club, Australian team Perth Glory. For Aylward, a football fan, this was a dream come true—or would be, subject to due diligence and a few signatures, which he assured me were mere formalities.
But the deal’s since fallen through, and Aylward, who raised over $40 million for his crypto platform, has been sued in the UK High Court by Murat Seitnepsov, an oil trader from Turkmenistan—who claims that Aylward and other LFE representatives didn’t repay a $2.2 million loan.
And a video taken by Aylward, dredged up by Australian radio station 6PR this week, showed Aylward beaming that the value of the token was safe, since he owned most of them anyway, and was “totally manipulating the price.”
Even worse, 6PR also claims it was shown documents that suggest Jim Aylward was using a fake identity; he was, in fact, James Abbass Biniaz, a man convicted to 22 months in prison in 2010 for fraud.
Alas, crypto remains crypto for yet another week. Onward, lads!