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NYC court has no right to hear ‘international’ case argues Bancor firm

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The legal team for a crypto firm facing possible securities law violations is asking for the case to be dismissed on geographical grounds. 

According to court records filed Oct. 13 in the U.S. Southern District of New York, lawyers for blockchain firm BProtocol Foundation argued that a court outside the U.S. would be more suited to oversee the case due to the “international” nature of the complaint. The BProtocol Foundation legal team said the complaint was “based on a man in Wisconsin using an exchange in Singapore to purchase tokens issued by a Swiss entity,” which was not appropriate to try in New York.

“The Southern District of New York is convenient only for Plaintiff’s counsel — not for any of the parties or any of the would-be witnesses,” the legal team for BProtocol Foundation asserted. BProtocol is the parent company of decentralized liquidity network Bancor.

Co-founders Eyal Hertzog, Yehuda Levi, Guy Benartzi and Galia Benartzi suggested to Judge Alvin K. Hellerstein that the lead plaintiff in the class-action lawsuit, Timothy C. Holsworth, could file a similar lawsuit in Israel, where the four have residence. The blockchain firm also has offices there, and in Switzerland.

“Israel has a robust legal system of which Plaintiff could avail himself.”

BProtocol Foundation is one of seven crypto companies facing court in New York following a series of lawsuits filed in April. Cryptocurrency exchanges Binance, KuCoin, BiBox, and BitMEX were named in the lawsuits along with alleged crypto issuers Block.one, Quantstamp, KayDex, Civic, Status, and the Tron Foundation.

The lawsuits allege that the exchanges sold unlicensed securities without broker-dealer licensing and engaged in market manipulation in addition to a number of them selectively withholding information from investors regarding the sale of their tokens as securities. In BProtocol Foundation’s case, Holsworth alleges the blockchain firm violated U.S. securities laws with the sale of its Bancor Network Token (BNT).

However, whether or not the crypto assets in question comprise securities is not the main thrust of the argument behind the legal team’s motion to dismiss. It stated “the Court need not reach that question to dismiss the Complaint.”

“Since Plaintiff purchased his BNT on an exchange based in Singapore, his transaction was wholly foreign to the United States,” the blockchain firm’s lawyers said. ”No part of the Securities Act applies because BNT are not securities.”

The class-action lawsuits are something of a jurisdictional nightmare, with many exchanges and token issuers based outside the U.S. needing to be served using the Hague Convention. In addition, many courtrooms are still experiencing disruptions caused by the current pandemic.



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New York authorizes first Yen stablecoin operator in the US

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New York has given the first authorization to a stablecoin backed by the Japanese Yen to operate in the U.S.

Per a Dec. 29 announcement, the New York Department of Financial Services has granted Japanese firm GMO-Z.com a charter to handle U.S.D. and Yen-backed stablecoins in New York. 

Given New York’s status as a global center, the NYDFS is the most prominent state financial regulator in the U.S. It is also one of the most aggressive. A pass to operate in New York often opens up the rest of the country. 

GMO’s charter is as a limited liability trust company rather than a full bank, the principle difference being in authorization to handle deposits. While a stablecoin operator typically needs the ability to hold reserves of the pegged asset, GMO’s charter limits its rights to hold other kinds of deposits not central to its ability “to issue, administer, and redeem” its stablecoins. 

The right to issue such non-depository charters has been a bone of contention between state regulators like the NYDFS and national banking regulators in the U.S. 

GMO president and CEO Ken Nakamura said: “We’re breaking ground with our move to issue the first regulated JPY-pegged stablecoin, which many see as a safe haven asset.” 

The NYDFS recently made changes to its famous BitLicense, including a conditional format that buddies up newly licensed firms with existing licensees. The first conditional BitLicense went to PayPal, facilitating the launch of its new crypto services earlier this fall with the help of longstanding licensee Paxos.