We have highlighted in a recent message regulators’ clear intentions to bring order to the cryptocurrency industry this year. However, the past three weeks have demonstrated that private litigants are not waiting for regulators to crack down on suspected bad actors in the crypto market. Two new high-profile lawsuits target what plaintiffs call fraudulent activity in this booming industry.
First, alleging that a publicly traded cryptocurrency company’s “platform is a house of cards, built on false promises and factually impossible representations that were specifically designed to take advantage of the cryptocurrency, to the direct detriment of any ordinary investor,” lawyers filed a putative class action lawsuit on Christmas Eve against Voyager Digital Ltd. and its subsidiary, Voyager Digital LLC.
The closing statement claims that the Voyager companies made false statements, including allegedly misleading statements that their cryptocurrency platform is “100% commission-free” and that customers will receive the best price possible on their crypto trades. As a result, according to the complaint, the defendants reaped billions of dollars in new income from people with little or no investment experience.
The complaint also claims that Voyager failed to disclose that it intentionally set the price on its platform high enough to collect “exorbitant hidden commissions” on each cryptocurrency transaction, and that the price of the transaction was , in fact, more expensive than transactions on other platforms. .
Mark Cuban, owner of the NBA’s Dallas Mavericks, is a major Voyager shareholder. The complaint alleges that he made comments during a press conference in which he specifically targeted unsophisticated investors “with false and misleading promises to reap large profits in the cryptocurrency market. “.
The plaintiffs’ attorneys suing the Voyager defendants intend to represent both a national class and a separate Florida class. The putative national class will claim that Voyager violated New Jersey’s consumer fraud law and is also liable for unjust enrichment. The Florida class, which will allege violations of Florida’s Deceptive and Unfair Trade Practices Act, is said to be made up of people who used the trading platform to place cryptocurrency investment orders. The trial is ongoing in the Southern District of Florida.
Meanwhile, in a separate class action lawsuit filed earlier this month in the Central District of California, Kim Kardashian and boxer Floyd Mayweather face allegations they misled investors while promoting a little-known cryptocurrency called EthereumMax to their millions of social media followers. This class action accuses EthereumMax and its celebrity promoters of artificially inflating the token’s price by making “false or misleading statements” in social media posts.
A Kardashian Instagram post last year promoted the cryptocurrency EthereumMax, which reportedly spurred a substantial amount of investment activity by unwary investors. “Do you like crypto??” Kardashian wrote. “This is not financial advice but a sharing of what my friends just told me about the Ethereum Max token!” Kardashian went on to praise this new currency.
Mayweather endorsed the token during his boxing match with YouTube star Logan Paul. EthereumMax was actually accepted as payment for tickets to the event, a move that the lawsuit says led to a significant increase in trading volumes. Mayweather also allegedly touted EthereumMax at a major bitcoin conference in Miami, and did so without revealing that he was being compensated for his statements about the token.
The lawsuit claims that the named plaintiff, a New York resident, and other investors who purchased EthereumMax tokens between May 14, 2021 and June 17, 2021 suffered losses due to celebrity conduct. EthereumMax has lost around 97% of its value since early June, leading to claims that it is a “scam” and/or a “pump and dump” scheme.
EthereumMax “has no connection” to Ether, the second-largest cryptocurrency, the lawsuit says. The lawsuit says the company’s name may be an effort to mislead investors into falsely believing the token is part of the Ethereum network.
Whatever the merits of these and other recent lawsuits, there is little doubt that crypto companies – and their promoters – need not simply be attuned to new regulatory decrees and scheduled examination. They should also be wary of lawsuits alleging misrepresentation of value and overstatements of likely investment returns. In this regard, the “Wild West” cryptocurrency is only getting wilder.