It is well known that the crypto industry experiences higher rates of litigation on average than many other niches. There seems to be an unending stream of legal challenges from numerous simultaneous directions. Between government agencies threatening injunctions and fines against crypto founders for not registering a security (even though these same agencies have said that crypto is not a security), challenges with mainstream media publishing false reports, and individual opportunists who claim to lose money when values fluctuate, there are many challenges that crypto projects need to remain vigilant about.
We are following two news stories this week that involve some high-profile legal actions in the crypto community. The first story is about Binance, one of the world’s largest digital asset exchanges, which filed a defamation lawsuit against Forbes for publishing false statements about their business. According to the legal complaint filed by Binance, Forbes claimed that Binance created a corporate structure designed to “intentionally deceive regulators” and that the company is involved in activity that they deemed was “characteristic of money laundering.”
The Forbes article was based on a document they obtained which claimed to show Binance’s corporate structure. However, according to Binance the document is a slideshow proposal prepared by a third-party, not by Binance or anyone on its behalf. Binance claims that the proposal was never implemented.
Binance also claims that Forbes’ grossly misrepresented what the document actually says. Their attorney stated that the article did great harm to the company’s reputation. A retraction or correction was initially demanded but refused by the publisher. The lawsuit became a necessary next step to preserve the company’s reputation.
While we are not directly involved in this matter, META 1 Coin Trust knows very well what it is like to have one’s reputation damaged by negative claims made by news websites. We deeply respect freedom of speech and a free press, and at the same time, there is a need for accountability in reporting that preserves reputations. We are eager to see how this legal action gets resolved and we naturally support all crypto projects in defending their good names.
The second news story about crypto legal actions this week is about a settlement between the US Securities and Exchange Commission (SEC) and associates of rapper T.I. who co-promoted a cryptocurrency with him. Previously, in true dramatic flair, the SEC published a press release on September 11, 2020 against T.I. and a host of co-defendants, claiming they committed various alleged violations.
T.I. previously settled and it seems his associates will be paying about $100k to the SEC as part of their settlement as well, based on reports this week.
In general, when one offers an unregistered ICO, it opens the door for the SEC to repeat its laundry list of standard claims of issuing an unregistered security, misappropriation of funds whenever funds are moved, fraud (whenever claims are made that the SEC doesn’t like), etc. even when none of these charges are valid. Their logic is based on the fact that if they are not invited into one’s inner chamber, then only bad things must be happening, since after all, the person involved bought a Ferrari with their income (someone did buy one in this case, as many successful people do).
Once again, the SEC knows that the merits of its charges are not likely to hold up in court, so this settlement is another instance of a shakedown of a high profile, successful person to make the government look good as a protector of the people. We look forward to seeing press releases showing how Wall Street’s next generation of toxic assets are shutdown by the SEC to prevent another financial meltdown rather than reading about genuine individuals being persecuted.