class action

SBF and FTX fraud ‘aided and abetted’ by Silvergate Bank, alleges lawsuit

The filing is the latest proposed class action in a string of lawsuits aimed at Silvergate over the last two months about its links with Sam Bankman-Fried and defunct crypto exchange FTX.

Silvergate Bank and its CEO Alan Lane have been accused of “aiding and abetting” a “multibillion-dollar fraudulent scheme orchestrated by Sam Bankman-Fried (SBF)” and two of his entities, FTX and Alameda Research, in a newly proposed class-action lawsuit.

The proposed class-action lawsuit was filed in the United States District Court for the Northern District of California on Feb. 14 by lawyers representing a San Francisco-based FTX user who was frozen out of around $20,000 in crypto when the exchange collapsed last year.

Plaintiff Soham Bhatia alleges that Silvergate Bank, its parent company Silvergate Capital Corporation and CEO Alan Lane were aware of the use of FTX customer funds by Alameda Research and has accused them of concealing “the true nature of FTX” from its customers.

“At all relevant times, Silvergate, Bankman-Fried and Lane were each co-conspirators of the other,” according to the lawsuit, adding:

The lawsuit alleges Silvergate and Lane aided, abetted, encouraged and substantially assisted Bankman-Fried in jointly perpetrating a fraudulent scheme upon Plaintiff and the class.

“By aiding, abetting, encouraging and substantially assisting the wrongful acts, omissions and other misconduct alleged above, Defendants acted with an awareness of their wrongdoing and realized that their conduct would substantially aid the accomplishment of their illegal design.”

The suit seeks a combination of damages, restitution and disgorgement of profits with the amount to be determined in trial.

However, the lawsuit is yet to be certified by the district court, which is a necessary step before it can proceed as a class action.

Related: Crypto bank Silvergate ranks as the second- most-shorted stock on Wall Street

The latest proposed lawsuit is just another class-action complaint against Silvergate over the last two months.

On Dec. 14, plaintiff Joewy Gonzalez filed a similar class-action suit in the U.S. District Court for the Southern District of California — accusing Silvergate of its alleged role in “furthering FTX’s investment fraud” by aiding and abetting the crypto exchange when it placed FTX user deposits into the bank accounts of Alameda.

On Jan. 10, a class-action suit was filed against Silvergate Capital Corporation in the United States District Court of Southern California alleging that Silvergate’s platform failed to detect occurrences of money laundering “in amounts exceeding $425 million” involving South American money launderers.

Other companies have also been accused of similar wrongdoings. 

Last week on Feb. 6, algorithmic trading firm Statistica Capital filed a putative class-action lawsuit against New York-based Signature Bank, alleging it had “actual knowledge of and substantially facilitated the now-infamous FTX fraud.”

“In particular, Signature knew of and permitted the commingling of FTX customer funds within its proprietary, blockchain-based payments network, Signet,” it wrote.

Cointelegraph has reached out to Silvergate for comment but did not receive a response at the time of publication.

Logan Paul and CryptoZoo hit with lawsuit as investors take action

Plaintiff Don Holland has filed a lawsuit against CryptoZoo and Logan Paul, alleging the YouTube influencer’s “fraudulent venture” executed a “rug pull.”

CryptoZoo and Logan Paul have been named as defendants in a newly filed class-action lawsuit, which alleges they stole millions of dollars worth of purchaser’s cryptocurrency via a “fraudulent venture.”

In a court filing on Feb. 2 in the District Court of the Western District of Texas, plaintiff Don Holland alleged that Paul and executives at CryptoZoo (CZ) “executed a ‘rug pull’” by promising purchasers of the nonfungible tokens (NFTs) exclusive access to crypto assets among other benefits, but ultimately abandoned the project and kept the funds.

“As part of Defendants’ NFT scheme, Defendants marketed CZ NFTs to purchasers by falsely claiming that, in exchange for transferring cryptocurrency to purchase the CZ NFT, purchasers would later receive benefits, including, among other things, rewards, exclusive access to other cryptocurrency assets, and the support of an online ecosystem to use and market CZ NFTs,” it wrote.

“In reality, soon after completing the sale of all their CZ NFTs, Defendants, together with others […] transferred millions of dollars’ worth of purchasers’ cryptocurrency to, among other places, wallets controlled by Defendants,” it alleged.

The lawsuit was submitted by attorneys from Ellzey & Associates and Attorney Tom and Associates, the latter of which is the law firm run by YouTube personality Attorney Tom.

In a YouTube video on Jan. 16, Attorney Tom told viewers that they are suing Paul over the alleged crypto scam after “weeks of investigation and speaking to a number of Crypto Zoo victims.”

Other defendants named in the suit include Danielle Strobel, Jeff Levin, Eddie Ibanez, Jake Greenbaum (Crypto King) and Ophir Bentov (Ben Roth), according to Attorney Tom.

This lawsuit comes despite Paul unveiling a $1.5 million recovery plan for disgruntled investors in the CryptoZoo project via a video on Twitter on Jan. 13.

He also revealed that he is no longer going to sue CoffeeZilla over his allegations that his project is a scam, stating that suing him is “not going to help Cryptozoo holders,” adding that he wants to focus on “fans and supporters of him.”

Related: Logan Paul backflips on defamation lawsuit against Coffeezilla, apologizes

Paul outlined his recovery plan will consist of three stages — stating the first stage will be himself and the co-founder of CryptoZoo, Jeff Levin, burning their ZOO token holdings.

He clarified in doing this they will “have no financial upside” in the game, and it will “add value to the holders’ tokens.”

Paul claimed the second stage will involve him personally committing 1,000 Ether (ETH) to the project so that “disappointed” investors can burn their NFTs to get their initial investment of 0.1 ETH back, the cost to mint the NFT.

Meanwhile the third and final stage he hopes to “deliver the game as outlined in the whitepaper.”

Argo Blockchain accused of misleading investors in class-action lawsuit

After a torrid 2022 that saw it sell off its flagship mining facility, Argo Blockchain’s woes are worsening after a recent class-action suit.

Investors of crypto mining firm Argo Blockchain have filed a class-action lawsuit accusing the miner of making untrue statements and omitting key information during its initial public offering (IPO) in 2021.

A newly filed lawsuit on Jan. 26 is aimed at Argo and several of its executives and board members. It claims the firm failed to disclose how susceptible it was to capital constraints, electricity costs and network difficulties.

“The offering documents were negligently prepared and, as a result, contained untrue statements of material fact or omitted to state other facts necessary to make the statements made not misleading,” the lawsuit read.

As a result, the investors claim the business was “less sustainable” than they had been led to believe, which led to an overstatement of the miner’s financial prospects. The complaint noted:

“Had [the investors] known the truth, they would not have purchased or otherwise acquired said securities, or would not have purchased or otherwise acquired them at the inflated prices that were paid.”

Argo released the information in question on Sep. 23, 2021, when the firm filed documents with the United States Securities and Exchange Commission (SEC) relating to its IPO.

7.5 million shares were issued to the public on the same date at an offering price of $15, resulting in proceeds of $105 million before expenses.

Since then, the miner’s share price has taken a beating and is currently trading at $1.96 per share after falling as low as $0.36.

The share price decline of Argo Blockchain from Sep. 2021 to present. Source: Yahoo Finance

Cointelegraph requested comment from Argo but did not immediately receive a response.

Related: Bitcoin hash rate taps new milestone with miner hodling at 1-year low

The recent lawsuit comes just days after Argo regained compliance with Nasdaq’s listing rule on Jan. 23, which requires a company to maintain a minimum closing bid price of $1 for 10 consecutive trading days.

Argo has had to make some difficult decisions to weather the ongoing bear market and tough conditions facing crypto miners. On Dec. 28, 2022, it announced that it would sell its flagship mining facility, Helios, to digital asset investment manager Galaxy Digital, for $65 million.

The Helios mining facility during its grand opening. Source: YouTube

Crypto miners, in general, had a torrid year in 2022, with high electricity prices, falling crypto prices and increased mining difficulty all eating into their bottom line.

LastPass data breach led to $53K in Bitcoin stolen, lawsuit alleges

A class action is seeking damages from the password manager following a data breach in August 2022.

A class-action lawsuit has been filed against password management service LastPass following a data breach from Aug. 2022.

The class action was filed with the United States district court of Massachusetts on Jan. 3 by an unnamed plaintiff known only as “John Doe” and on behalf of others similarly situated.

It alleges that the data breach of LastPass has resulted in the theft of around $53,000 worth of Bitcoin (BTC).

The plaintiff claimed he began accruing BTC in July 2022 and updated his master password to more than 12 characters using a password generator, as recommended by the LastPass “best practices.”

This was done to enable the storage of private keys in the seemingly secure LastPass customer vault.

When news of the data breach broke, the plaintiff deleted his private information from his customer vault. LastPass was hacked in Aug. 2022, with the attacker stealing encrypted passwords and other data, according to a December statement from the company.

Despite the quick action to delete the data, it appeared to be too late for the plaintiff. The lawsuit read:

“However, on or around Thanksgiving weekend of 2022, Plaintiff’s Bitcoin was stolen using the private keys he stored with Defendant [LastPass].”

“The LastPass Data Breach has, through no fault of his own, exposed him to the theft of his Bitcoin and exposed him to continued risk,” it added.

The suit claims that victims have been put at increased substantial risk of future fraud and misuse of their private information, which may take years to manifest, discover and detect.

LastPass is being accused of negligence, breach of contract, unjust enrichment and breach of fiduciary duty. However, the figure sought in damages was not specified.

Related: ‘Third-party incident’ impacted Gemini with 5.7 million emails leaked

According to cybersecurity researcher Graham Cluley, the stolen data includes unencrypted information including company names, user names, billing addresses, telephone numbers, email addresses, IP addresses and website URLs from password vaults.

In December, LastPass admitted that if customers had weak Master Passwords, the attackers may be able to use brute force to guess this password, allowing them to decrypt the vaults.

Class action against Kim K, Mayweather over EMAX dismissed… for now

Despite dismissing the case, the judge acknowledged the lawsuit reflects a potentially dangerous trend of fraudulent-like promotional schemes.

A federal judge in California has dismissed a class action lawsuit against reality TV star Kim Kardashian, boxing champ Floyd Mayweather and the founders of EthereumMax, explaining that the submissions failed to meet the “heightened pleading standards” for fraud claims.

The judge has, however, left room for the plaintiffs to refile the lawsuit if certain provisions are amended.

In the original Jan. 7 court filing by Scott+Scott Attorneys At Law, the plaintiffs argued that Kardashian, Mayweather and former NBA superstar Paul Pierce didn’t disclose they were being paid to promote EthereumMax (EMAX).

The plaintiffs alleged that they used  “false or misleading statements” to “artificially inflate the price of the token.”

Kardashian promoted EMAX in a June 2021 post on Instagram, while Mayweather wore the EMAX logo on his boxing trunks in a match against YouTube star Logan Paul that same month.

According to reports, Judge Michael Fitzgerald dismissed the lawsuit Dec. 7 on the grounds that the fraud allegations lacked merit and that investors at the end of the day have a responsibility to conduct due diligence on their investments:

“But, while the law certainly places limits on those advertisers, it also expects investors to act reasonably before basing their bets on the zeitgeist of the moment.”

However, Judge Fitzgerald acknowledged in his dismissal the power that celebrities have been afforded by new technologies and social media platforms in establishing potentially fraudulent promotional schemes.

“This action demonstrates that just about anyone with the technical skills and/or connections can mint a new currency and create their own digital market overnight,” Fitzgerald reportedly wrote in his dismissal.

Celebrities now have the ability to “readily persuade millions of undiscerning followers to buy snake oil with unprecedented ease and reach,” he added.

Related: SafeMoon pump-and-dump lawsuit targets Jake Paul, Soulja Boy and others

Despite the dismissal, the investors’ fight may not be over. Fitzgerald reportedly stated that he’d allow the plaintiffs to refile the lawsuit if their legal team amended a few provisions from its original filing, with the judge making reference to a provision of the Racketeer Influenced and Corrupt Organizations Act (RICO).

Kardashian has already been bitten once before over her promotion of EthereumMax on her social media account. 

On Oct. 3, Kardashian reached a $1.26 million settlement with the U.S. Securities Exchange Commission after allegedly failing to disclose she was paid $250,000 to promote EthereumMax.

Mayweather’s legal team has long denied any affiliation with the EthereumMax, with his attorneys stating that the filing did not “identify a single statement made by Mayweather about eMax tokens or EthereumMax.”

Ava Labs CEO denies CryptoLeaks’ claims as ‘conspiracy theory nonsense’

The CEO’s comments come after a CryptoLeaks blog post alleged that Ava Labs had a “secret pact” with a U.S. law firm to sue competitors in exchange for AVAX tokens and equity.

Ava Labs CEO Emin Gün Sirer has dismissed sensational allegations from CryptoLeaks that his company used litigation to “harm” competitors and fool regulators, labeling it as “conspiracy theory nonsense.”

Sirer made the comments in an Aug. 28 Twitter post to his 280,500 followers, referring to an Aug. 26 article from CryptoLeaks alleging the company formed a “secret pact” with U.S. law firm Roche Freedman to use the American legal system “gangster style” to “attack and harm crypto organizations.”

On Friday, CryptoLeaks published a series of candid videos from an unknown source purportedly showing U.S. Attorney Kyle Roche of Roche Freedman LLP detailing his partnership and relationship with Emin Gün Sirer and Kevin Sekniqi, the respective CEO and COO of Ava Labs. 

CryptoLeaks claimed that Roche Freedman and Kyle Roche have a deal to provide Ava Labs with legal services in exchange for the AVAX tokens and Ava Labs equity, and would also use “litigation as a tool” to disrupt competitors and misdirect regulators such as the Security Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).

The publication also said the videos of Roche suggest there was a tight-knit relationship between Roche and Sirer, which began in academia, and that they also moved into a co-working space together in Aug. 2019, around the time that the deal was made for him to provide legal services in exchange for token supply. Roche stated: 

“Gün [Sirer] … we did a deal, where I agreed to provide legal services in exchange for a certain percentage of the token supply.”

Another video also shows Roche saying that they “used [litigation services] as a strategic instrument to support Ava Labs.”

“I sue half the companies in this space, I know where this market is going, I believe [I am] one of the top 10 [crypto experts] in this world… I’ve seen the insides of every single crypto company,” according to the video.

Roche said in one video that he “makes sure that the SEC and CFTC have other magnets [Avalanche competitors] to go after,” adding that “litigation can be a tool to competition.”

Ava Labs CEO Emin Gün Sirer vehemently denied the allegations in the article, stating it was “conspiracy theory nonsense” and saying that Ava Labs would “never engage in unlawful, unethical and just plain wrong behavior.”

According to Roche Freedman LLP’s website, Roche employs at least 24 attorneys, with offices situated in New York City, Boston and Miami. Roche attended North Western University School of Law and co-authored “Why Bitcoin is booming” in the Wall Street Journal in Jul. 2017.

Roche Freedman LLP’s was recently involved in a high-profile lawsuit against Solana Labs, Solana Foundation, and Solana co-founder Anatoly Yakovenko on Jul. 1. 2022, claiming that Solana violated U.S. Federal Security laws by offering unregistered securities to U.S. investors.

About two weeks earlier on Jun. 15, Roche Freedman LLP also filed a lawsuit against Binance, claiming that the crypto exchange unlawfully engaged in the sale of UST to investors.

Cointelegraph reached out to Ava Labs for comment, but no immediate response was received. 

Class action lawsuit claims Solana’s SOL is an unregistered security

Plaintiffs claim that Solana’s SOL token is a centralized security with insiders profiting immensely while retail traders got rekt.

Solana Labs is the latest crypto company to be hit with a lawsuit accusing it of promoting an unregistered security.

The class action was filed on July 1 by Roche Freedman LLP and Schneider Wallace Cottrell Konecky in the district court for the northern district of California on behalf of plaintiff Mark Young, a state resident.

The lawsuit accuses Solana Labs, the Solana Foundation, Anatoly Yakovenko, Multicoin Capital Management, Kyle Samani and FalconX of selling unregistered securities tokens in the form of Solana (SOL) from March 24, 2020:

“Defendants made enormous profits through the sale of SOL securities to retail investors in the United States in violation of the registration provisions of federal and state securities laws, and the investors have suffered enormous losses,”

The plaintiff is taking action on behalf of himself and other SOL investors with further claims that Solana Labs “deliberately misleading statements” concerning the total circulating supply of SOL tokens.

According to the lawsuit, Solana Labs founder Anatoly Yakovenko lent a market maker more than 11.3 million tokens in April 2020 and failed to disclose this information to the public. The company stated it would reduce the supply by this amount but only burned 3.3 million tokens, the lawsuit claims.

The plaintiffs also took umbrage with Solana’s claims of being decentralized. “As of May 2021, insiders held 48% of the SOL supply. The network is thus highly centralized,” it added.

The lawsuit’s outcome could have significant implications for Solana and the broader crypto industry. SOL may be delisted from leading crypto exchanges if it is deemed to be a security by a court. Coinbase and Kraken delisted Ripple (XRP) in late 2020 following the SEC’s lawsuit against Ripple, which is soon to be concluded.

Related: Reliably unreliable: Solana price dives after latest network outage

The suit comes on top of Solana’s ongoing reliability woes, with the network having suffered at least seven full or partial outages over the past 12 months. These outages were mentioned in the filing with claims they resulted in “major losses for network users,” as they caused the trading value of SOL to fall dramatically.

SOL prices have tanked 85% from their November 6 all-time high of $260 and are currently trading at a little under $40, according to CoinGecko.

Solana Labs and Multicoin Capital were contacted for comment but had not responded by the time of publication.

Elon Musk gets hit with ‘ridiculous’ $258B Dogecoin lawsuit

The class-action lawsuit has raised many eyebrows in the crypto community, with many confident the suit will not be successful.

Billionaire Elon Musk, along with his companies SpaceX and Tesla Inc, are all being sued for an astonishing $258 billion in damages for being “engaged in a crypto pyramid scheme” involving Dogecoin (DOGE).

The damages sought are more than 34 times Dogecoin’s current market cap of $7.5 billion and nearly three times its all-time high (ATH) market cap of $88.68 billion in mid-2021.

Filed in the New York District Court by an attorney at Evan Spencer Law on Thursday, the class-action lawsuit alleges that Musk “used his pedestal as World’s Richest man to operate and manipulate the Dogecoin Pyramid Scheme for profit, exposure, and amusement.”

In the filing, plaintiff Keith Johnson, a United States citizen, alleges that Musk and his corporations were “unjustly enriched” by $86 billion as a result of wire fraud, gambling enterprise, false advertising, deceptive practices and other unlawful conduct.

Johnson claims that he and others in the class-action have lost approximately $86 billion between May 2021 and June 2022, and is demanding that figure in monetary damages along with another $172 billion in damages and fees:

“Defendant Musk is the self-appointed ‘Dogefather,’ ‘former CEO of Dogecoin,’ partner, developer, spokesperson, publicist, salesman, marketer, and promoter of Dogecoin, who assembled the ‘Doge Army’ including his corporations and various billionaires, influencers, and celebrities to increase the price, market cap and trading volume of Dogecoin.”

In January, Musk announced that his electric vehicle company Telsa would accept DOGE as payment for the company’s merchandise. In May, he announced that Dogecoin payments would also be accepted by his space exploration company SpaceX.

The lawsuit also demands an order declaring the trading of Dogecoin to be constituted as gambling within New York and federal law and also alleges that Musk and his companies have violated state and federal gambling laws.

“Since Plaintiff and the class were not advised that the trading of Dogecoin was nothing more than a gambling enterprise, Plaintiff and the class demand the return of all wagers lost trading Dogecoin.”

It also seeks to order Musk and his companies and any other unlicensed professionals from advertising, marketing or promoting Dogecoin in the future.

Community reacts

The crypto community has ridiculed the lawsuit.

Related: Dogecoin’s parents are fighting: Musk and Jackson Palmer exchange barbs

Pseudonymous Dogecoin creator Shibetoshi Nakamoto’s tweet was cited in the lawsuit as supporting evidence, calling the lawsuit “stupid as fuck” on Twitter on Thursday while admitting that crypto trading isn’t much different from gambling.

Rahul Sood, CEO, and co-founder of Irreverent Labs, which builds blockchain games called it a “stupid class-action lawsuit” 

“Amazing that in the US someone could launch such a stupid class-action lawsuit. These guys all knew what they were getting into. Ridiculous.”

Ron Coleman, a commercial litigator and partner at Dhillon Law Group with 196,000 Twitter followers, replied to a Tweet about the news, noting that “anyone can say anything in a lawsuit.”