IN THIS ISSUE
Eleventh Circuit Overturns Dismissal of Cryptocurrency Ponzi Scheme Class Action Suit; Federal Court of Appeals Dismisses Leading Fannie Mae and Freddie Mac Shareholder Lawsuits; NY Seeks Blockchain Analytics to Combat Sanctions Evasion; Delaware Chancery Court Allows Cannabis Company Shareholder Class Action to Advance; SDNY Denies Application for Mootness Fee in Connection with Merger-Disclosure Litigation
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On February 18, 2022, the U.S. Court of Appeals for the Eleventh Circuit reversed the dismissal of an investor class action accusing the now-defunct cryptocurrency marketplace BitConnect and its online promotions team of operating a Ponzi scheme.
The plaintiffs, buyers of the BitConnect coins, alleged that BitConnect’s “promoters” were liable under Section 12 of the Securities Act of 1933 for soliciting the purchase of unregistered securities. Specifically, plaintiffs asserted that BitConnect used a “multilevel marketing” structure to incentivize successive sets of investors to draw in new rounds of recruits. The promoters allegedly informed investors that they could earn outsized returns by buying and holding BitConnect coins, touting BitConnect’s “staking” program where investors could earn up to 10% interest per month just for holding their BitConnect coin in their virtual wallet, and also BitConnect’s “lending” program where investors lent their coins to Bitconnect which would then trade the coins for profit. Investors…
