Securities Litigation

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In a recent and highly anticipated decision, a court in the Southern District of New York held that Ripple’s cryptocurrency token – XRP – is not inherently a security.  In a setback to the SEC, the court also held that certain sales of XRP to retail investors through blind “bid/ask” transactions[1] were not securities transactions when considering the economic realities and under the totality of the circumstances.  SEC v. Ripple Labs, Inc., et al.[2] 

The court delivered its decision on these “programmatic sales” of XRP to retail investors, as well as its decisions on “institutional” and other types of sales of XRP, when ruling on competing summary judgment motions.  Even though the court’s rulings were limited to the transactions at issue and could be appealed, its decision undermines the SEC’s current position that it requires no additional authority from Congress to regulate both sales of tokens and cryptocurrency trading platforms. …

Continue Reading Ripple’s Legal Waves: Ripple Summary Judgment Ruling Could Have Wide-Ranging Impact

This week the Delaware Supreme Court ruled that Delaware corporations may enforce federal forum selection clauses (so-called federal forum provisions or “FFPs”) for lawsuits alleging breaches of the Securities Act of 1933. See Salzberg v. Sciabacucchi, No. 346, 2019, 2020 Del. LEXIS 100 (March 18, 2020). This ruling is significant because Delaware companies can require the filing of ‘33 Act claims, including class actions, in federal court. Federal court is perceived as a more favorable forum than state court, including because of dismissal procedures and the perceived familiarity of federal jurists with the federal securities acts. By statute, for instance, federal courts already have exclusive jurisdiction of claims under the Securities Exchange Act of 1934, i.e. Section 10(b) and Rule 10b-5 actions.
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Continue Reading Keeping it All in the Family

Celadon Group Inc. announced a settlement with the SEC and the DOJ over allegations of accounting fraud.[1]  The company agreed to pay restitution of over $42 million in connection with a Deferred Prosecution Agreement with the DOJ, and to pay disgorgement of roughly $7.5 million in a parallel SEC settlement.  The disgorgement obligation is deemed satisfied by payment of the $42 million restitution amount.
Continue Reading Freight Company Charged with Truckload of Accounting Fraud

Securities litigation frequently raises the question of what conduct constitutes a primary violation of the federal securities laws, specifically, Rule 10b-5 and the various other antifraud provisions.  Must one make a false statement in order to be primarily liable?[1]  The Supreme Court held in Janus Capital Group, Inc. v. First Derivative Traders that only those who “make any untrue statement of material fact” may violate Rule 10b5-(b).[2]  …
Continue Reading Janus Meets Its Maker: The Supreme Court Expands Primary Liability in Lorenzo v. SEC