Cryptocurrency Litigation Strategies

𝘿𝙚𝙡𝙞𝙨𝙩𝙞𝙣𝙜 = 𝘿𝙖𝙢𝙖𝙜𝙚𝙨: 𝘽𝙎𝙑 𝘾𝙡𝙖𝙞𝙢𝙨 𝙇𝙩𝙙 𝙫 𝘽𝙞𝙩𝙩𝙮𝙡𝙞𝙘𝙞𝙤𝙪𝙨 𝙇𝙩𝙙 [2025] 𝙀𝙒𝘾𝘼 𝘾𝙞𝙫 661 In a landmark ruling for crypto litigation, the UK Court of Appeal decisively shut down attempts by BSV holders to claim billions in speculative losses following the 2019 delisting of Bitcoin SV by Binance and some other exchanges. The claimants (c. 243,000 holders) alleged anti-competitive conduct by exchanges, arguing they were deprived not just of actual value—but of the chance that BSV might have "mooned" like BTC or BCH. Their expert even quantified damages at 352x the token’s value at the time. Vos MR (joined by Males and Snowden LJJ) wasn’t persuaded. The Court reaffirmed core principles: 👉 The Market Mitigation Rule: Once investors are aware of a wrongful event, they must mitigate losses by exiting or reallocating. Crypto, like shares or derivatives, is a tradeable asset. Holding BSV post-delisting was a choice—not a liability for exchanges. 👉 Speculative Damages = Legal Damages: You cannot recover for imagined future appreciation. Courts do not underwrite alternate price trajectories or investor regret. Crypto is volatile, not sacred. 👉 Loss of Chance Doctrine – Narrowly Applied: This doctrine requires genuine third-party uncertainty. BSV’s speculative rise doesn’t meet that bar. Retaining a coin in hopes it becomes a top-tier asset isn’t legally compensable. 🧠 Strategic Implications: 🔹 A. For Crypto-Exchanges: Delisting, even if concerted, is not per se tortious if the coin remains freely tradeable elsewhere. This strengthens the business judgment rule for crypto marketplaces. Public, time-stamped disclosure of delisting rationale (as the defendants did) may function as a prophylactic shield against future claims. Digital asset market structure is now judicially treated as sufficiently mature and substitutable—at least for high-liquidity tokens. This suggests exchanges do not owe ongoing access obligations to token holders. 🔹 B. For Investors and Class Action Strategists: Failure to mitigate kills speculative upside: Token holders who sit tight post-delisting in the hope of recovery do so at their own risk. Plaintiffs must differentiate between actual harm (e.g., permanent wallet lockouts) and reversible loss in speculative instruments. The former may be recoverable; the latter, almost never. 🔹 C. For Legal Systems Across Common Law Crypto Jurisdictions (e.g., Cyprus, Singapore, DIFC-ADGM): This judgment serves as de facto persuasive precedent for market mitigation treatment of cryptoassets, even in jurisdictions still building crypto-specific caselaw. Investor protection via tort or competition law in crypto will be constrained by asset liquidity, disclosure norms, and asset substitutability—mirroring securities litigation. So As Vos MR put it: “𝘐𝘧 𝘩𝘰𝘭𝘥𝘦𝘳𝘴 𝘤𝘩𝘰𝘴𝘦 𝘵𝘰 𝘳𝘦𝘵𝘢𝘪𝘯 𝘵𝘩𝘦𝘪𝘳 𝘥𝘢𝘮𝘢𝘨𝘦𝘥 𝘩𝘰𝘭𝘥𝘪𝘯𝘨𝘴... 𝘵𝘩𝘦𝘺 𝘥𝘪𝘥 𝘴𝘰 𝘢𝘵 𝘵𝘩𝘦𝘪𝘳 𝘰𝘸𝘯 𝘳𝘪𝘴𝘬.”

Regulatory clarity isn’t given—it’s won. And Coinbase just showed how. 🛠 Challenging the SEC’s Authority From the outset, Coinbase strategically disputed the SEC’s interpretation of securities laws, arguing that existing regulations were being stretched beyond their intended scope. By pressing for judicial clarity, Coinbase forced regulators to define boundaries rather than move goalposts. 📜 Leveraging Formal Petitions & Litigation Rather than simply reacting to enforcement actions, Coinbase proactively petitioned the SEC for rulemaking, positioning itself as a constructive participant in regulatory discourse. When clarity wasn’t forthcoming, it pursued litigation, compelling the courts to weigh in where regulators would not. 📊 Operational Transparency & Compliance Posture Coinbase built its defense on a foundation of rigorous compliance efforts—registering as a public company, engaging in extensive SEC disclosures, and maintaining a robust compliance framework. These actions underscored its argument that it had operated in good faith under existing laws. 🤝 Building Public & Industry Support or as CEO Brian Armstrong said, “It was the right thing to do for our customers and the industry.” By framing its battle as one that impacts the broader fintech and crypto ecosystem, Coinbase rallied industry stakeholders and policymakers to advocate for clearer, innovation-friendly regulations. Its messaging extended beyond legal arguments to shaping the broader policy conversation. The question now: Will FinTech leaders take a passive stance or use this moment to drive proactive engagement?

From the NY Courts: more lessons for crypto asset platforms! 🔐 ▪️With disputes on the rise, it is important for consumer-facing crypto asset platforms to establish an enforceable arbitration clause in their terms of service. ▪️However, arbitration agreements might be unenforceable if they are not properly incorporated into the terms of service, or incompatible with local statute providing for litigation of such disputes. ▪️In this case, the Southern District of New York rejected both grounds put forth by a user seeking to circumvent arbitration. ▪️The court found the arbitration agreement, in the terms of service linked on the platform’s sign-up page, was sufficiently conspicuous, and was also enforceable notwithstanding the existence of legislation permitting class action litigation for securities claims. ▪️The case serves as a useful reminder to platform operators about the importance of fully incorporating terms of service into their platforms. Read the #reedsmith alert on Hastings v. Nifty Gateway, LLC, 22 Civ. 10517 (AT) co-authored with Mark Bini, Hagen Rooke, Jonathan Ammons, Brett Hillis, Ramsey Hanna, Michael A. Tomasulo and Niyati Ahuja. #cryptocurrency #arbitration #digitalassets

I am dusting off the article that Nicosia Lawson and I wrote for the ThoughtLeaders4 FIRE | TL4FIRE 2022 Year End Review on Remedies Available in Cayman for Victims of Cryptocurrency Fraud. Whilst the case law has continued to evolve since then (mostly in jurisdictions such as the BVI, Singapore and the UK), the general principles and approaches for combatting fraud and recovering assets apply - albeit with a bit more complexity in the digital asset space. In the article, we outlined that: 🔸 Our Grand Court is well equipped to address crypto asset related claims 🔸 Freezing orders, Norwich Pharmacal orders and Bankers Trust Orders will be available tools for victims 🔸 Our Grand Court may be open to alternative means of service including service via NFT airdrop, as our court has demonstrated a pragmatic approach to service including in a recent judgment in the 1MDB related Cayman matter - In the Matter of Bridge Global Absolute Return Fund (SPC) - FSD 51 of 2022 (IKJ), which Nicosia and I acted in Since writing this article, our Cayman Islands team acted for retail investors to obtain the first ever winding up order against a cryptocurrency enterprise in the Cayman Islands (Atom Holdings - the holding company for the AAX exchange). We have also advised founders, investors and other stakeholders on a variety of issues including the recovery of stolen crypto, DAO related issues, and other disputes. #fraud #crypto #insolvency #litigation