By James Fanelli
Lawsuits over cryptocurrency lossesare mounting across the country, as investing in digital tokens and coins has become mainstream and the money at stake has increased significantly.
Even before the recent plunge in crypto prices, the industry already was seeing an uptick in lawsuits, which have come in several forms. Many of the cases have been fueled by investors who allege some digital coins were hyped andsold under false pretenses. Some proposed class-action suits allege pump-and-dump schemes involving celebrity promoters. Others allege that some digital tokensare unregistered securitiesor that cryptocurrency issuers were deceitful in their marketing.
Collectively, the lawsuits speak to both the troubles and successes of a maturing industry.
‘We’re seeing all of the normal kinds of litigation that you would see in more traditional companies.’
— Jason Gottlieb, a partner at Morrison Cohen
“We’re seeing all of the normal kinds of litigation that you would see in more traditional companies,” said Jason Gottlieb, a partner at Morrison Cohen LLP who tracks cryptocurrency litigation.
Mr. Gottlieb said the industry also was attracting an influx of plaintiff and defense lawyers who realizethe crypto marketis no longer “some obscure backwater for a small gaggle of techno-libertarian nerds. It’s a real business.”
Among recent lawsuits is a case filed in a California federal court over losses in the stablecoin GYEN. The suit accuses GMO-Z.com Trust Co., the issuer of GYEN, and crypto exchangeCoinbase GlobalInc.COIN$Coinbase Global, Inc.(COIN)$ of advertising the stablecoin as being pegged to the Japanese yen, thereby providing a safer investment than more volatile cryptocurrencies. But when GYEN began trading on Coinbase in November, it immediately became untethered from the yen, leading the coin to spike in value and then drop 80% in one day, the lawsuit alleges. A similar peg break occurred in May 2021 when GYEN became available on a separate exchange, according to the lawsuit.
Kenneth Donovan, 27 years old and a plaintiff who began investing in cryptocurrency in 2019, said he bought $335,000 worth of GYEN last year after reading its white paper and learning the New York Department of Financial Services had authorized GMO-Z.com to issue stablecoins in the state.
In a matter of hours, he said, his investment plummeted to $3,000, wiping out nearly his entire life savings. Before the loss, he, his wife and their young daughter lived comfortably off his investments and gig work for Uber and DoorDash driving shifts, Mr. Donovan said. “I live paycheck-to-paycheck now.”
Resource: Finance Yahoo
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