The overall performance of the cryptocurrency markets in 2024 has led to a notable reduction in the number of securities class action lawsuits related to crypto, compared to previous years. While the volume of cases has declined, the nature of the claims being made by plaintiffs remains consistent with those seen in the past. This report delves into the trends observed in crypto securities class action litigation for 2024, focusing on the decline in filed cases, geographic distribution, stages of litigation, types of defendants and allegations, as well as price fluctuations of stocks or assets following corporate disclosures, reports from short sellers, or government announcements.
### 2024 Sees Fewer Cases Filed Amidst Robust Crypto Markets
In 2024, only eight securities class action lawsuits related to cryptocurrency were initiated, marking a significant drop from the 14 cases filed in 2023, 23 in 2022, 12 in 2021, and 13 in 2020. This decline is likely linked to the impressive recovery and stability of the cryptocurrency markets throughout the year. Historical patterns suggest that fewer legal actions occur during bullish market phases when investors are experiencing gains. In contrast, the frequency of lawsuits tends to rise during bearish periods, known as “crypto winter,” which is characterized by low asset prices.
### Geographic Distribution and Current Litigation Stages
The limited number of crypto-related securities class actions in 2024 also reflects a narrower geographic distribution compared to previous years. The lawsuits were primarily filed in New York, California, New Jersey, and Pennsylvania, with specific cases located in various districts across these states. Notably, New York and California remain popular jurisdictions, likely due to their strong presence of crypto businesses and prior successes in litigation within those locales. Consistent with trends from earlier years, most defendants in these class actions were based in the United States, with firms such as Future FinTech Group Inc., Hut 8 Corp., Dolce & Gabbana USA Inc., and Midnight Hub being central to the allegations. Additionally, one notable case involves Caitlyn Jenner, a well-known celebrity. The eight cases filed this year are still unresolved and in the preliminary stages of litigation, suggesting they may extend into 2025 or beyond. The impact of the U.S. Securities and Exchange Commission’s (SEC) recent decisions on ongoing litigation against Coinbase remains uncertain.
### Nature of Allegations and Types of Defendants
In 2024, crypto securities class actions targeted a diverse range of defendants, including crypto miners, a financial services company engaged in crypto mining and data services, a trading platform, a Web3 streaming platform involved in non-fungible tokens (NFTs), as well as an NFT issuer from the fashion sector and a Web3 launchpad platform. Three of the eight lawsuits involved defendants associated with crypto platforms, while two were linked to NFT-related enterprises. This pattern aligns with recent years, where crypto exchanges and NFT companies have frequently been the subjects of litigation. The complaints predominantly allege violations of certain provisions of the Securities Exchange Act of 1934, particularly regarding anti-fraud measures. Additionally, claims of unregistered offerings and sales of securities in violation of the Securities Act of 1933 are common, especially in the context of meme coins and NFTs.
### Case Highlights: Hut 8 Corp. Securities Litigation
One prominent case involves Hut 8 Corp., a company formed through the merger of Hut 8 Mining Corp. and U.S. Data Mining Group, Inc. The amended complaint asserts that the defendants provided misleading information about the financial health of U.S. Bitcoin Corp. and concealed its imminent bankruptcy. Allegations suggest that a report from a short seller ultimately brought these issues to light. As the crypto industry continues to gain traction and more companies become publicly traded, the influence of short seller reports on asset prices is expected to remain a significant factor.
### Iris Energy Limited Securities Litigation
Another significant case targets Iris Energy Limited, a crypto mining firm. The plaintiffs argue that misleading statements regarding the company’s operations and prospects were made, particularly in relation to deficiencies at their Texas facility. The allegations also cite a short seller report that allegedly exposed these misrepresentations.
### Future FinTech Group Inc. Securities Litigation
The only 2024 securities class action against a primarily financial services company involves Future FinTech Group Inc. Here, the plaintiff claims the company and its CEO engaged in manipulative practices, including false statements about stock ownership and regulatory risks. The allegations intensified following an SEC complaint against the CEO, which purportedly revealed the “truth” regarding these manipulations.
### Coinbase Global, Inc. Securities Litigation
This case marks the sole instance involving a crypto exchange as a defendant, showcasing the global dimension of the cryptocurrency sector. It alleges that Coinbase made misleading statements about compliance with UK regulations, affecting its ability to prevent misuse of its platform. A significant drop in Coinbase’s stock price followed announcements from regulatory bodies regarding fines for compliance breaches.
### Dolce & Gabbana USA Inc. NFTs Securities Litigation
One of two NFT-related securities class actions in 2024, this case revolves around Dolce & Gabbana’s joint venture with UNXD Inc. to launch the DGFamily crypto project. The plaintiff claims that the offering constituted an illegal sale of unregistered securities, coupled with unmet promises regarding the delivery of NFTs and associated benefits.
### Midnight Hub Securities Litigation
The second NFT-related lawsuit involves Midnight Hub, which is accused of unlawfully offering and selling NFTs without proper registration. The allegations echo those of other NFT cases, citing violations of securities laws.
### High-Profile Meme Coin Cases
The final two lawsuits pertain to meme coins associated with celebrities. The first concerns the $HAWK meme coin and its connection to Haliey Welch, while the second involves the $JENNER meme coin linked to Caitlyn Jenner. Both cases allege that these cryptocurrencies were unlawfully offered for sale without proper registration, with claims that the celebrities promoted them on social media platforms. Meme coins often attract investors due to celebrity endorsements, leading to volatile price movements and raising concerns about their speculative nature. Should the bullish market trend reverse in 2025, it is anticipated that more class actions could emerge surrounding these types of investments, particularly when their values plummet.
