Cryptocurrency class actions are on the rise. The Wall Street Journal reported today that in a review of 1,450 digital coin offerings the authors identified "red flags" associated with 271. The article cites as red flags "plagiarized investor documents, promises of guaranteed returns and missing or fake executive teams." See Hundreds of Cryptocurrencies Show Hallmarks of Fraud, WSJ, by Shifflett and Jones, May 18, 2018. Plaintiffs filing class actions will want to consider filing these cases in state court.
Can plaintiffs keep their cases in state courts (defeat removal or obtain remand)?
In any large nationwide class action plaintiffs face a gauntlet of federal law challenges that allow defendants to remove their cases to federal court. This gauntlet includes The Class Action Fairness Act (CAFA) and, in the securities context, The 1998 Securities Litigation Uniform Standards Act (SLUSA).
The gauntlet is surmountable according to the U.S. Supreme Court. The Court recently held that a class representative bringing a class action in state court, and alleging a violation The Securities Act of 1933 (1933 Act), has a right to proceed in state court. See Cyan, Inc. et al. v. Beaver County Employees Retirement Fund, et al., No. 15-1439 (U.S. 2018). In that case the plaintiffs filed suit under the 1933 Act, and did not allege violations of either The Securities Exchange Act of 1934 (1934 Act) or any state law. Had the plaintiffs alleged violations of the 1934 Act, or likely any other federal or state law, the defendants would have been able to remove the case.
If you are considering bringing a cryptocurrency class action, you should consider limiting your petition or complaint to allegations relating to the 1933 Act only. This may allow you to keep your case in state court and obtain a more favorable outcome for the class.
If you have questions regarding a digital coin case, or any other class action, please don’t hesitate to call our office at (314) 725-4400 or send us a message here.