BlockChain Law & Litigation

Paypal Files U.S. Patent to Speed Up Crypto Processing times
 While  sceptics fixate on antiquated United States securities laws and the market cap of Bitcoin, tech processing payment giant  Paypal moves to patent  on  an " “Expedited Virtual Currency Transaction System”, involving the use of secondary private keys to shorten wait times for transactions between consumers and merchants.  Paypal's transactional engine, of course, is still built around the traditional credit card and legacy banking systems.

While  sceptics fixate on antiquated United States securities laws and the market cap of Bitcoin, tech processing payment giant Paypal moves to patent on  an " “Expedited Virtual Currency Transaction System”, involving the use of secondary private keys to shorten wait times for transactions between consumers and merchants.

Paypal's transactional engine, of course, is still built around the traditional credit card and legacy banking systems.

 

 

 

Christopher Meatto
Legaler $35 Million ICO Blockchain Platform for Attorney Communications and Legal Aid

AS reported in Artificial Lawyer:

 

"Australian legal tech start-up, Legaler, which helps lawyers to securely communicate and collaborate online is to launch its own cryptocurrency via an Initial Coin Offering (ICO). The company is also launching a new legal aid charity platform, supported by the $35m ICO, which will operate as a blockchain-based Decentralised Autonomous Organisation, or DAO."

The DAO planned by Legaler, among other things, connects donors, legal aid groups, clients, law schools and others to distribute pro bono and fee generating cases in an efficient, fair, and secure ecosystem."

 

Christopher Meatto
Switzerland Takes Lead in ICO Classification for Securities Law Purposes

Crowdfund Insider reports that the Swiss regulators have published clear guidelines that create three distinct categories of Initial Coin Offerings.  In publishing the guidelines, the FINMA CEO stated:

“The application of blockchain technology has innovative potential within and far beyond the financial markets. However, blockchain-based projects conducted analogously to regulated activities cannot simply circumvent the tried and tested regulatory framework. Our balanced approach to handling ICO projects and enquiries allows legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with our laws protecting investors and the integrity of the financial system.”

The three categories of tokens, Payment Tokens, Utility Tokens, and Asset Tokens, hope to provide blockchain entrepreneurs a clear legal roadmap for compliance.  

Of special interest, FINMA will not treat Payment Tokens as securities and will not treat Utility Tokens as securities if "their sole purpose is to confer digital access rights to anapplication or service and if the utility token can already be used in this way at the point of issue.

Christopher Meatto
ICO Blockchain Pivot Class Action Filed in New York

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Blockchain pivot challenged under securities laws

"According to the court documents, the cases stem from the initial announcement on Oct. 10, 2017, when Xunlei said it would launch its own blockchain-based cryptocurrency dubbed OneCoin, also known as Wanke Coin, which was later renamed to Lianke, or LinkToken in English.According to announcements at the time, Wanke Coin was issued as a reward for Xunlei's OneCloud users who were willing to share their idle network bandwidth on its platform. In order to receive this reward, users need to purchase an item of hardware called OneThing Cloud from Xunlei to be able to share their cloud storage and network bandwidth."

 

Christopher Meatto
Delaware Blockchain Initiative

Why The Delaware Blockchain Initiative Matters To All Dealmakers

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STATE OF DELAWARE PRESS RELEASE HIGHLIGHTS: "Smart contracts offer a powerful and innovative way to streamline cumbersome back-office procedures, lower transactional costs for consumers and businesses, and manage and reduce risk," said Governor Markell. "We're delighted that Delaware has this opportunity to help lead the way in promoting blockchain technology and its growing role in digital commerce."

Blockchain-based smart contracts will digitize records to autonomously update, delete, share or be acted upon when specific conditions are met, like expirations. The State anticipates the technology will bring tremendous efficiencies and speed to the sophisticated commercial transactions for which Delaware has long set the standard.

The Governor also announced that the State has begun exploring its own use cases for blockchain technology. Symbiont, a distributed ledger and smart securities startup that focuses on smart contracts and is a leader in the blockchain industry, is working with the Delaware Public Archives to store state archival records on a distributed ledger. This effort will demonstrate the opportunity for the State to use this technology to help archive, catalog and cryptographically secure government records that are held by scores of state and local agencies and that were produced and exist only in digital form."

Christopher Meatto
Opinion Highlights of Dismissal of Case Challenging New York $5K BitLicense

Coindesk Coverage Here

Chino v New York Dept. of Fin. Servs., 2017 N.Y. Misc. LEXIS 5029, 2017 NY Slip Op 51908(U)

Failure to Exhaust Administrative Remedies: "Petitioner did not complete LTD's application, and did not respond to DFS' January 2016 letter which notified him of his failure to do so. Petitioner acknowledges that he abandoned the application process because of the pendency of this hybrid action/proceeding challenging the regulation (Chino Aff. in Opp. To Cross-Motion, at ¶ 16). CPLR § 7803 provides a petitioner with a means to challenge "whether a determination was made in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion" (CPLR § 7803 [3]). Moreover, "one who objects to the acts of an administrative agency must exhaust available administrative remedies before being permitted to litigate in a court of law" (DiBlasio v Novello, 28 AD3d 339, 341, 814 N.Y.S.2d 51 [1st Dept 2006] [citations and internal quotation marks omitted]). Courts cannot "interject themselves into ongoing administrative proceedings until final resolution of those proceedings before the agency" (Id.). In the proceeding at hand, DFS did not [*20]  reach a final decision. Indeed, it did not reach any decision. Accordingly, there is nothing for this Court to review."

No Loss, No Standing. "In the proper [*23]  circumstances, the argument that a regulation imposes "an unacceptable burden" on an individual or business is sufficient to establish standing (See Doe v Axelrod, 136 AD2nd 410, 527 N.Y.S.2d 385 [1st Dept 1988] [concerning regulations on pharmaceutical and medical professions that allegedly interfered with ability to provide medical case, invaded patients' privacy, and violated interstate commerce clause]). If, for example, this matter involved the issue of organizational standing, or, as in Doe v Axelrod, a large coalition of business owners who showed harm to their business under the regulation, or an individual or business that could show the probability of financial harm, there might be a strong argument in favor of standing. Here, however, petitioner did not apply for certification,8 and has not shown sufficient economic loss. Any argument as to the $5,000 application fee was waived because petitioner did not pay the fee or pursue the application. His economic loss argument is otherwise insufficient because LTD has never made a profit and petitioner showed proof of only one $279.41 sale. Moreover, its losses in 2016, once petitioner thought LTD was subject to the regulation, are not inconsistent with LTD's prior financial history.

Christopher Meatto
SEC - Plexcorps - Injunction Jurisdiction in Issue and Subject to Discovery

from Techcrunch:  

"Called PlexCoins, PlexCorp allegedly used this cryptocurrency to scam would-be investors hoping to cash in early on the company’s growth, telling them each PlexCoin would “yield a 1,354 percent profit in less than 29 days,” according to a statement from the SEC.  The government agency also charged company founders Dominic Lacroix and Sabrina Paradis-Royer for their part in the sale and announced it had frozen company assets in an effort to halt this “fast-moving Initial Coin Offering (ICO) fraud.”

 

STIPULATION AND !PROPOSED ORDER

SEC v. Plexcorps 17 Civ. 7007 (CBA) EDNY

IT lS HEREBY STlPULATED AND AGREED. by an<l between the undersigned attorneys for the parties that:

1.              Pursuant to the Court"s Minute Order and Minute Entry filed on January 9, 2018 (the "Minute Order"), the parties will conduct discovery on the Court"s personal jurisdiction through April 13, 2018.

2.              Defendants· brief in support of its motion to dismiss this action on personal jurisdiction grounds shall be due April 27, 2018.

3.              Plaintiff's brief in opposition to ()cfcndants' n1otion l(> dis1niss shall be due May  25, 2018.

 

4.             Defendants' reply brief shall be due June 8, 2018.

5.             If approved by the Court, the hearing currently set for March 5, 2018, is hereby adjourned.

6.             Should this action remain pending upon resolution of Defendants' motion to dismiss, the parties shall file within three (3) business days of that resolution a proposed schedule to resume the deadlines set forth in the Temporary Restraining Order, and Order Freezing Assets and Granting Other Relief dated December 1, 2017 (the "OSC") (DE #10) and the terms of the Stipulation and Order dated December 8, 2017 (the "Stipulation and Order") (DE #19), currently stayed by the Minute Order including dates for (a) the submission of the documents required by Paragraph 5 of the Stipulation and Order; (b) the submission of a sworn verified accounting ordered by Paragraph XII of the OSC; (c) the opposing papers in response to the OSC ordered by Paragraph XIV of the OSC; (d) the Commission's reply papers ordered by Paragraph XV of the OSC; and (e) the hearing on the order to show cause ordered by Paragraph J of the OSC.

7.             If approved by the Court, the following orders shall be extended up and until the

conclusion of the hearing on the order to show cause as set forth in paragraph 6 herein, or  until such date as the Court has held the preliminary injunction hearing contemplated by the OSC, or until such time as the Court modifies any portion of the order based on a joint stipulation by the parties:

a.     The temporary restraining orders imposed by paragraphs V, VI, and VII of the OSC;

b.    The asset freeze imposed by paragraph VIII of the OSC;

c.     The repatriation order imposed by paragraph IX of the OSC; and

d.    The order against destruction of documents imposed by paragraph X of the OSC.

8.             Nothing in this stipulation shall be construed as affecting the Defendants' rights as to any jurisdictional issues, or to make jurisdictional challenges in this action.

9.              Nothing in this stipulation shall be construed as affecting the parties· rights and responsibilities under all other parts of the OSC, including but not limited to the Commission·s right to pursue third-party discovery as per the terms of parngraph XI of the OSC.

Dated: New York, New York

January 11, 2018

Christopher Meatto
Token Launch Rather Than ICO Offering

Relying on the principle that the name of a thing can change the color of its spots, major New York Law firm partner Lee Schneider,  Debevoise & Plimpton is quoted as preferring the “token launches" to ICO offering.

Christopher Meatto
ICO Coin Offerings Receive Qualified Endorsement from Securities and Exchange Commission

"I believe that initial coin offerings – whether they represent offerings of securities or not – can be effective ways for entrepreneurs and others to raise funding, including for innovative projects.  However, any such activity that involves an offering of securities must be accompanied by the important disclosures, processes and other investor protections that our securities laws require."

So wrote Securities and Exchange Commission Jay Clayton in an official statement in December, 2017.

 

Christopher Meatto