Ku Coin

Case 1:20-cv-02806 Document 1 Filed 04/03/20 Page 1 of 79
UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK
CHASE WILLIAMS, individually and on behalf of

all others similarly situated,
Plaintiff,
No. ______________
v.
JURY DEMANDED
KUCOIN, MICHAEL GAN, JOHNNY LYU, and
ERIC DON,
Defendants.
CLASS ACTION COMPLAINT

Individually and on behalf of all others similarly situated, Plaintiff Chase Williams brings
this action against Defendants KuCoin, Michael Gan, Johnny Lyu, and Eric Don. Plaintiff’s
allegations are based upon personal knowledge as to himself and his own acts, and upon
information and belief as to all other matters based on the investigation conducted by and through
Plaintiff’s attorneys, which included, among other things, a review of whitepapers of the digital
tokens at issue, press releases, media reports, and other publicly disclosed reports and information
about Defendants. Plaintiff believes that substantial additional evidentiary support will exist for
the allegations set forth herein, after a reasonable opportunity for discovery. Plaintiff hereby
alleges as follows:
I. INTRODUCTION
1. On behalf of a class of investors who purchased ten digital tokens that KuCoin has
sold through its online exchange since September 15, 2017 (the “Class”), without registering under
applicable federal and state securities laws as an exchange or broker-dealer, and without a
registration statement in effect for the securities it was selling, Plaintiff and members of the Class
seek to recover the consideration paid for the tokens and the fees they paid to KuCoin in connection
with their purchases of EOS, SNT, QSP, KNC, TRX, OMG, LEND, ELF, CVC, and TOMO
(together, the “Tokens”).
2. A digital token is a type of digital asset that exists on a “blockchain,” which is
essentially a decentralized digital ledger that records transactions. Various digital assets can reside
on blockchains, including cryptocurrencies, such as Bitcoin and Ethereum (both discussed in
greater detail below), as well as so-called “smart contracts” that operate under a set of
predetermined conditions agreed on by users. With smart contracts, the terms of the contract are
automatically carried out by the software underlying the digital tokens (which, as relevant here,
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are referred to as “ERC-20 tokens” and exist on the Ethereum blockchain) when the agreed
conditions are met.
3. Certain of these digital tokens are classified as “utility tokens.” Their primary
purpose is to allow the holder to use or access a particular project. For example, one private-jet
company issues utility tokens to participants in its membership program, who can then use them
to charter flights on the company’s planes. A utility token presumes a functional network on which
the token can be used.
4. Other tokens are more speculative and are referred to as “security tokens,” and like
a traditional security essentially represent one’s investment in a project. Although the tokens take
value from the startup behind the project, they do not give the holder actual ownership in that
startup. Rather, investors purchase these tokens with the idea that their value will increase as the
network in which the token can be used is expanded based upon the managerial efforts of the issuer
and those developing the project. Because such “security tokens” are properly classified as
securities under federal and state law, the issuers of these Tokens (the “Issuers”) were required to
file registration statements with the U.S. Securities and Exchange Commission (“SEC”), and
KuCoin was required to register itself as an exchange with the SEC. Neither the Issuers nor
KuCoin filed any such registration statements. Instead, KuCoin and the Issuers entered into
contracts to list these Tokens for sale on the KuCoin exchange in violation of federal and state law.
As a result, KuCoin and the Issuers reaped billions of dollars in profits.
5. The scheme worked as follows: working to capitalize on the enthusiasm for
cryptocurrencies like bitcoin, an Issuer would announce a revolutionary digital token. This token
would typically be billed as “better,” “faster,” “cheaper,” “more connected,” “more trustworthy,”
and “more secure.” The Issuer would then sell some of its tokens in an initial coin offering (“ICO”)
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to a small group of investors and then turn to KuCoin to list the new token, at which point KuCoin
would undertake its own efforts to promote sales, and to solicit and encourage purchases, by a
wide universe of investors. The Issuers would thereby raise hundreds of millions, even billions,
of dollars from purchasers of the tokens. KuCoin would profit handsomely as well by receiving a
percentage of each trade and by receiving substantial payments from Issuers to have their tokens
listed.
6. The Issuers were generally careful to describe these tokens both as providing some
specific utility and as something other than “securities.” But the vast majority of these new tokens
turned out to be empty promises. They were not “better,” “faster,” “cheaper,” “more connected,”
“more trustworthy” or “more secure” than what existed in the marketplace. In reality, they often
had no utility at all. The promises of new products and markets went unfulfilled, with the networks
never fully developed, while investors were left holding the bag when these tokens crashed.
Indeed, all of the Tokens are now trading at a tiny fraction of their 2017–2018 highs. One of the
Tokens at issue, TRX, is down more than 95 percent from its 2018 high. QSP was trading at
around 72 cents in January 2018; today, it trades at around 0.7 cents. After their ICOs, the prices
of OMG and ELF tokens skyrocketed to more than $25 and $2.50 per token, respectively; today,
they trade at around $0.56 and $0.06 per token. The EOS token reached a high of $22.89. Today,
it is worth only $2.22.
7. Investors were provided with scant information when deciding whether to purchase
a token. In fact, the only offering materials available to investors were “whitepapers” that would
describe, in highly technical terms, the supposed utility of a token. These whitepapers would often
omit, however, the robust disclosures that the securities laws and the SEC have long codified as
essential to investor protections in initial public offerings, including use of “plain English” to
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describe the offering; a required list of key risk factors; a description of key information and
incentives concerning management; warnings about relying on forward-looking statements; an
explanation of how the proceeds from the offering would be used, and a standardized format that
investors could readily follow. Instead, these ICOs were the “Wild West”—with investors left to
fend for themselves. Without the mandatory disclosures that would have been required had these
ICOs been properly registered with the SEC, investors could not reliably assess the representations
made or the risks of their investments.
8. In 2017 and 2018, at the height of this frenzy of activity, hundreds of ICOs raised
nearly $20 billion with virtually no regulatory oversight or guidance to investors. Issuers and
exchanges like KuCoin, preying on the public’s lack of familiarity with the technology
underpinning these tokens, characterized these tokens as “utility tokens,” even though they were
in effect bets that a particular project would develop into a successful venture. In truth, these
tokens are securities under federal and state securities laws.
9. On April 3, 2019, in a “Framework for ‘Investment Contract’ Analysis of Digital
Assets” (the “Framework”), the SEC clarified that the Tokens are “investment contracts” and
therefore securities under Section 2 of the Securities Act of 1933 (the “Securities Act”), 15 U.S.C.
§ 77b(a)(1), and Section 3 of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C.
§ 77c(a)(10).1 Prior to that time, a reasonable investor would not have concluded that these Tokens
were securities that should have been registered with the SEC. But the Tokens are securities. For
example, on September 30, 2019—nearly six months after releasing its Framework, and more than
two years after the relevant ICO began—the SEC completed an investigation and found that
1
Framework for “Investment Contract” Analysis of Digital Assets, SEC (April 3, 2019),
https://www.sec.gov/corpfin/framework-investment-contract-analysis-digital-assets#_ednref1.
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Block.one had violated the Securities Act by selling the digital token EOS, an unregistered
security, to the public. As a result of this SEC enforcement action, Block.one was required to pay
a $24 million fine.2 The SEC’s determination that EOS was an unregistered security applies with
equal force to the other Tokens.
10. KuCoin and the Issuers wrongfully engaged in millions of transactions—including
the solicitation, offer, and sale of securities—without registering the Tokens as securities, and
without KuCoin registering with the SEC as an exchange or broker-dealer. As a result, investors
were not informed of the significant risks inherent in these investments, as federal and state
securities laws require.
11. KuCoin participated in illegal solicitations and sales of securities for which no
registration statement was in effect, and as to which no exemption from registration was available.
Each ICO was a generalized solicitation made using statements posted on the Internet and
distributed throughout the world, including throughout the United States, and the securities were
offered and sold to Plaintiff and the general public in the United States. Because these sales, as
well as KuCoin’s underlying contracts with the Issuers that facilitated these sales, violated both
the Securities Act and the Exchange Act, Plaintiff and the Class are entitled to recover the
consideration paid for the Tokens with interest thereon at the legal rate, or the equivalent in
monetary damages plus interest at the legal rate from the date of purchase, as well as the fees paid
to KuCoin on such purchases.
12. In addition, numerous Class members resided, and were present at the time they
traded in the Tokens, in States that provide their own “Blue Sky” protections for investors,
2
Press Release, SEC Orders Blockchain Company to Pay $24 Million Penalty for Unregistered
ICO (Sept. 30, 2019), https://www.sec.gov/news/press-release/2019-202; Block.one, Exchange
Act Release No. 10714, 2019 WL 4793292 (Sept. 30, 2019).
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including the State of Texas.3 These States generally provide that the investors in these States who
purchased these unregistered Tokens are entitled to rescission or damages, as well as interest
thereon, attorneys’ fees, and costs.
II. PARTIES
A. Plaintiff
13. Plaintiff Chase Williams is a resident of Houston, Texas. Williams and members
of the Class purchased Tokens on KuCoin and pursuant to contracts with KuCoin, from Texas
during the Class Period.
B. Defendants
14. Defendant KuCoin launched in September 2017, and claims to have “grown into
one of the most popular crypto exchanges,” serving “5 million users”—“[o]ne out of four crypto
holders worldwide”—“across 207 countries and regions around the world.” KuCoin facilitates
trades in digital assets, including the Tokens, by providing a marketplace and facilities for bringing
together buyers and sellers of securities, in exchange for KuCoin taking a fee for every transaction
it facilitates. Since its founding, KuCoin has regularly and intentionally engaged in numerous
online securities transactions inside the United States, with United States residents, without
complying with U.S. laws. In addition, KuCoin has promoted inside the United States the sale of
digital assets on its exchange.
15. KuCoin’s initial CEO, defendant Michael Gan, founded KuCoin as a Seychelles
entity headquartered in Hong Kong, but has since moved KuCoin’s headquarters to Singapore. In
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These “Blue Sky” statutes are so named because they are designed to protect investors from
“speculative schemes which have no more basis than so many feet of blue sky.” Hall v.
Geiger-Jones Co., 242 U.S. 539, 550 (1917) (internal citations omitted). Like the federal securities
laws, Texas defines “securities” to include “investment contracts,” which has been interpreted by
Texas courts at least as broadly as the standard set forth by the Supreme Court in S.E.C. v. W.J.
Howey Co., 328 U.S. 293 (1946).
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March 2020, KuCoin announced the establishment of KuGroup (consisting of three business
groups—KuCoin Global, KuCloud, and the KuChain and KCS Ecosystem) and appointed Gan as
Chairman of KuGroup. In that role, Gan “oversee[s] the global strategy of KuCoin Global.” On
information and belief, Gan resides in Singapore.
16. In March 2020, simultaneous with the announcement of KuGroup, Defendant
Johnny Lyu, co-founder of KuCoin, was promoted to CEO of KuCoin Global. In that role, Lyu,
is “responsible for the day-to-day operations of KuCoin.” On information and belief, Lyu resides
in Singapore.
17. Defendant Eric Don is co-founder and President of KuCoin, having previously
served as the Chief Operating Officer (“COO”) of KuCoin. On information and belief, Don resides
in Singapore.
III. JURISDICTION AND VENUE
18. Jurisdiction of this Court is founded upon 28 U.S.C. § 1331 because the Complaint
asserts claims under Sections 5, 12(a)(1), and 15 of the Securities Act, 15 U.S.C. §§ 77e, 77l(a)(1),
77o. This Court further has jurisdiction over the Securities Act claims pursuant to Section 22 of
the Securities Act, 15 U.S.C. § 77v.
19. Jurisdiction of this Court is also founded upon Section 27 of the Exchange Act, 15
U.S.C. § 78aa(a), which provides that federal courts have exclusive jurisdiction over violations of
the Exchange Act, including Sections 5, 15(a)(1), 20, and 29(b), 15 U.S.C. §§ 77e, 78o(a)(1), 78t,
78cc(b).
20. This Court has jurisdiction over the statutory claims of violations of Tex. Rev. Civ.
Stat. art. 581-33 pursuant to this Court’s supplemental jurisdiction under 28 U.S.C. § 1367(a).
21. This Court has personal jurisdiction over Defendants as a result of acts of
Defendants occurring in or aimed at the State of New York in connection with Defendants’ offer
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or sale of unregistered securities and failure to register with the SEC as an exchange or
broker-dealer.
22. Venue is proper pursuant to each of 15 U.S.C. § 77v(a) and 15 U.S.C. § 78aa(a) in
that this is a district wherein one or more defendants is found or is an inhabitant or transacts
business, or in the district where offers or sales at issue took place. KuCoin has transacted business
in the Southern District of New York, including by advertising a token listed on KuCoin on a
billboard in Times Square, and by recruiting a New York City-based firm, Global Blockchain
Innovative Capital, to join KuCoin’s “Global Titan Ambassador program” and “work with KuCoin
on the discovery and acceleration of early blockchain projects, as well as KuCoin . . . ecosystem
development.”
IV. FACTUAL ALLEGATIONS
A. The First Cryptocurrency: Bitcoin
23. A cryptocurrency is a digital asset designed to work as a medium of exchange or a
store of value or both. Cryptocurrencies leverage a variety of cryptographic principles to secure
transactions, control the creation of additional units, and verify the transfer of the underlying
digital assets.
24. Bitcoin was the world’s first decentralized cryptocurrency. It is also the largest and
most popular cryptocurrency, with a market capitalization of approximately $126 billion. Bitcoin
spawned a market of other cryptocurrencies that, together with bitcoin, have a current market
capitalization of approximately $192 billion. (The term “bitcoin” can refer to both a computer
protocol and a unit of exchange. Accepted practice is to use the term “Bitcoin” to label the protocol
and software, and the term “bitcoin” to label the units of exchange.)
25. At its core, Bitcoin is a ledger that tracks the ownership and transfer of every bitcoin
in existence. This ledger is called the blockchain.
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26. Blockchains act as the central technical commonality across most cryptocurrencies.
While each blockchain may be subject to different technical rules and permissions based on the
preferences of its creators, they are typically designed to achieve the similar goal of
decentralization.
27. Accordingly, blockchains are generally designed as a framework of incentives that
encourages some people to do the work of validating transactions while allowing others to take
advantage of the network. In order to ensure successful validation, those completing the validation
are also required to solve a “Proof of Work” problem by expending computational resources,
which has the effect of making the blockchain more accurate and secure. For Bitcoin, those who
validate the blockchain transactions and solve the “Proof of Work” program are rewarded with
newly minted bitcoin. This process is colloquially referred to as “mining.”
28. Mining is one way an individual can acquire cryptocurrencies like bitcoin. A
second way to acquire cryptocurrencies is to acquire them through an online “cryptocurrency
exchange.” Online cryptocurrency exchanges are one place to purchase Bitcoin and other
cryptocurrencies. These exchanges are similar to traditional exchanges in that they provide a
convenient marketplace to match buyers and sellers of virtual currencies.
29. In April 2013, there were only seven cryptocurrencies listed on
coinmartketcap.com, a popular website that tracks the cryptocurrency markets. As of this filing,
the site monitors more than 2,000 cryptocurrencies.
30. For a time, Bitcoin was the only cryptocurrency available on exchanges. As
cryptocurrencies grew in popularity, exchanges began listing other cryptocurrencies as well, and
trading volumes expanded. In early 2013, daily Bitcoin trading volumes hovered between $1
10
million and $25 million. By the end of 2017, daily Bitcoin trading volumes ranged between $200
million and $3.8 billion.
B. Ethereum
31. Ethereum is the second-most popular cryptocurrency, with a market capitalization
of approximately $16 billion. The Ethereum blockchain functions similarly to the Bitcoin
blockchain insofar as its miners act as the validators of the network. Miners of the Ethereum
blockchain are paid for their services in the form of newly minted ether. (The term “Ethereum”
refers to the open software platform built on top of the Ethereum blockchain, while the term “ether”
is the unit of account used to exchange value within the Ethereum “ecosystem,” i.e., the overall
network of individuals using Ethereum or participating in the development of its network. This
distinction is thus similar to the “Bitcoin” versus “bitcoin” distinction noted above.)
32. Unlike Bitcoin’s blockchain, Ethereum was designed to enable “smart contract”
functionality. A smart contract is a program that verifies and enforces the negotiation or
performance of a contract. Smart contracts can be self-executing and self-enforcing, which
theoretically reduces the transaction costs associated with traditional contracting.
33. As an example of how a smart contract works, consider a situation where two
people want to execute a hedging contract. They each put up $1,000 worth of ether. They agree
that, after a month, one of them will receive back $1,000 worth of ether at the dollar exchange rate
at that time, while the other receives the rest of the ether. The rest of the ether may or may not be
worth more than it was at the beginning of the month.
34. A smart contract enables these two people to submit the ether to a secure destination
and automatically distribute the ether at the end of the month without any third-party action. The
smart contract self-executes with instructions written in its code which get executed when the
specified conditions are met.

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35. In order to enable widespread adoption and standardized protocols for smart
contracts, the Ethereum community has created certain out-of-the box smart contracts called
Ethereum Request for Comments (“ERCs”).
36. An ERC is an application standard for a smart contract. Anyone can create an ERC
and then seek support for that standard. Once an ERC is accepted by the Ethereum community, it
benefits Ethereum users because it provides for uniform transactions, reduced risk, and efficient
processes. This is because it allows individuals who are less technically proficient to make use of
smart contract functionality. The most widespread use of ERCs is to allow individuals to easily
launch and create new digital tokens.
C. ERC-20 Tokens
37. ERC-20 is an application standard that the creator of Ethereum, Vitalik Buterin,
first proposed in 2015. ERC-20 is a standard that allows for the creation of smart-contract tokens
on the Ethereum blockchain. These tokens are known as “ERC-20 tokens.”
38. ERC-20 tokens are built on the Ethereum blockchain, and therefore they must be
exchanged on it. Accordingly, ERC-20 tokens are functionally different than cryptocurrencies like
Bitcoin and Ethereum because they do not operate on an independent blockchain.
39. ERC-20 tokens all function similarly by design—that is, they are compliant with
the ERC-20 application standard. Some properties related to ERC-20 tokens are customizable,
such as the total supply of tokens, the token’s ticker symbol, and the token’s name. All ERC-20
tokens transactions, however, occur over the Ethereum blockchain; none of them operates over its
own blockchain.
40. ERC-20 tokens are simple and easy to deploy. Anyone with a basic understanding
of Ethereum can use the ERC-20 protocol to create her own ERC-20 tokens, which she can then
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distribute and make available for purchase. Even people without any technical expertise can have
their own ERC-20 token created for them, which can then be marketed to investors.
D. The Advent Of The “ICO”
41. Between 2014 and 2016, Bitcoin’s price fluctuated between $200 and $800. During
this same time frame, ether’s price fluctuated between roughly $1 and $10.
42. By the end of 2016, interest in cryptocurrencies began to accelerate, with prices
growing at a rate historically unprecedented for any asset class. Over the course of 2017 alone,
bitcoin’s price increased from approximately $1,000 to approximately $20,000. Ethereum’s
growth was even more startling. On January 1, 2017, Ethereum was trading at approximately $8
per ether. Approximately one year later, it was trading at over $1,400 per ether—a return of
approximately 17,000 percent over that period.
43. Seeking to capitalize on the growing enthusiasm for cryptocurrencies, many
entrepreneurs sought to raise funds through initial coin offerings, or ICOs, including ICOs for
newly created ERC-20 tokens, such as the Tokens. Many of these issuers improperly chose not to
register their securities offerings with the SEC in order to save money and not “open their books”
to the SEC, even though investors thereby were denied access to critical information they would
have received from an SEC-registered offering. As a result, investors, including investors in digital
tokens, were denied access to critical information before making their investment decision.
44. Potential purchasers were reached through various cryptocurrency exchanges and
social media sites that published active and upcoming ICOs.
45. Between 2017 and 2018, nearly $20 billion was raised through ICOs. None of these
ICOs was registered with the SEC. Of the approximately 800 ICOs launched between 2017 and
2018, the vast majority were issued using the ERC-20 protocol.
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46. ERC-20 ICOs were typically announced and promoted through public online
channels. Issuers typically released a “whitepaper” describing the project and terms of the ICO,
and promoted the sale of the tokens. They typically advertised the creation of a “new blockchain
architecture.”
47. The whitepapers typically contained vastly less information than would have been
included in an SEC registration statement. For example, whitepapers typically did not include a
“plain English” description of the offering; a list of key risk factors; a description of important
information and incentives concerning management; warnings about relying on forward-looking
statements; an explanation of how the proceeds from the offering would be used; or a standardized
format that investors could readily follow.
48. As a result of the lack of information, trading of tokens on exchanges such as
KuCoin was rife for manipulation. In fact, as Aries Wanlin Wang, the founder of a rival exchange,
admitted, “the secondary market [for digital assets] can be rigged by manipulators. If you put
major currencies such as Bitcoin and Ethereum aside, many of the tokens you’ll find issued through
ICOs are there to be manipulated. These tokens are similar to penny stocks. And everyone wants
to believe they’ve discovered the next Bitcoin and Ethereum.” Mr. Wang further conceded that
“[t]he problems facing the secondary market in crypto are similar to the problems that were faced
by American stock exchanges 100 years ago. When a market lacks certain regulations and
oversights, predictable things happen. Pump and dumps are very common in the secondary market
of cryptocurrency, just as they were on the US stock exchange so many years ago.”
49. The Issuers declined to register the Tokens with the SEC, and KuCoin declined to
register itself as an exchange or broker-dealer, which registrations would have provided crucial
risk disclosure to investors, including members of the Class.
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E. KuCoin Solicited And Sold ERC-20 Tokens
50. KuCoin solicited the buying and selling of ERC-20 tokens on its unregistered
exchange and reaped extraordinary profits as a result.
51. KuCoin has touted the over 200 “high-quality blockchain projects” that trade on its
exchange, and purports that its web traffic “ranks [in] the top 5 globally” among cryptocurrency
exchanges, with daily trading volume of up to $500 million and “the smallest bid-ask spread in the
industry,” providing users with “[h]igh [l]iquidity.”
52. Lyu has boasted that “KuCoin has proved its value in the crypto space by offering
easy-to-use, secured and efficient financial services to users internationally. Over 65 billion
transaction volume has been handled so far and we will continue our journey to make KuCoin the
best place to trade.”
53. Industry estimates indicate that KuCoin earns millions of dollars of profit each
month, and as of March 2020, it had a market capitalization of approximately $85 million.
54. KuCoin has taken numerous steps to build its profile in the United States and
market itself to American users. For example, KuCoin was a Sponsor of SF Blockchain Week
2019 in San Francisco, California, and was an Exhibitor at World Crypto Con Las Vegas 2018 in
Las Vegas, Nevada. Additionally, KuCoin joined the Blockchain Education Alliance, an industry
group organized to “train the next generation of blockchain developers” that is affiliated with
American universities.
55. KuCoin has earned its substantial profits by building a platform that solicited the
buying and selling of unregistered securities on a massive scale. Defendants did this by taking
advantage of the market’s lack of sophistication with digital tokens, particularly ERC-20 tokens,
and the market excitement for Bitcoin and Ethereum more generally.
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56. Shortly after an issuer launched an ICO, the issuer would quickly seek to have its
tokens listed on cryptocurrency exchanges like KuCoin, in order to give the issuer access to
millions of retail investors to whom they could market the tokens.
57. KuCoin represents to potential investors that it “attempts to screen all tokens before
they come to market,” and Gan has publicly represented that KuCoin does not “list[] every project
[that] approached us,” and that KuCoin has “a strong project research team, consisting of over 20
professionals. Together with our big data analysis system and global partners, we are committed
to finding the best blockchain projects and bring[ing] [them] to the world before anyone else.”
58. Gan has emphasized that “KuCoin has been persistent in its pursuit of finding and
supporting blockchain projects with real potential,” and it “aims to assist blockchain projects in
raising the needed funds, attracting market attention and improving industrial influence. . . . We
are always trying to find promising blockchain projects and by listing them, we could help them
increase liquidity and get more public attention, these will help them develop better.”
59. Upon agreeing to list a new token on its cryptocurrency exchange, KuCoin typically
advertises the listing to its user base by stating that it is “extremely proud to announce yet another
great project coming to our trading platform.”
60. For example, KuCoin has described newly listed tokens as “world leading,” and
has offered incentives for users to trade tokens and to share token promotions on users’ social
media accounts:
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61. As another example, KuCoin, in celebration of its second anniversary, ran a
promotion during which tokens including TRX were given away to purchasers who participated
in certain activities through KuCoin’s platform:
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64. KuCoin profited handsomely from listing of new tokens on its platform. In addition
to receiving fees for each transaction performed on its exchange, KuCoin received large cash
payments from Issuers seeking to get their tokens listed.
F. Investors Would Not Reasonably Have Understood Prior To April 3, 2019, At

The Earliest, That The Tokens Were Securities
65. In connection with the ICOs, from 2017 until early 2019, the Issuers and KuCoin
made statements that would have led a reasonable investor to conclude that the Tokens were not
securities.
66. Issuers. Issuers of ERC-20 tokens repeatedly asserted that their tokens were “utility
tokens,” rather than “security tokens” (which would be securities that would have to be registered
with the SEC). As an initial matter, Issuers refused to register the Tokens with the SEC, thus
signaling to investors that these were not securities.
67. Issuers declared that the Tokens were not securities. For example, the EOS
Purchase Agreement stated:
As mentioned above, the EOS Tokens do not have any rights, uses,
purpose, attributes, functionalities or features, expressed or implied.
Although EOS Tokens may be tradable, they are not an investment,
currency, security, commodity, a swap on a currency, security, or
commodity or any kind of financial instrument.
68. Similarly, the TRON whitepaper stated that it “is not a security,” and owning
TRX does not mean that its owner has been afforded with the
proprietary right, controlling right, and/or policy-making right
regarding the TRON platform. As an encrypted token used in
TRON, TRX does not belong to any of the following categories:
(a) currency of any type; (b) securities; (c) stock rights of a legal
entity; (d) stocks, bonds, bills, warrants, certificates, investment
contract, or other instruments affording similar rights.
69. The TRON whitepaper also misleadingly compared TRX to Bitcoin, which is a
commodity. The TRON whitepaper asserted, for example, that its “distributed user registration
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mechanism is as secure as Bitcoin”; “the number of blocks generated per hour is automatically set
by the system, which is similar to the Bitcoin network”; and “[s]imilar to Bitcoin, [t]he [TRON]
market is based on blockchain and trade in virtual currency.”
70. At the time of the TRX ICO, TRON took advantage of the market’s lack of
understanding and awareness concerning how cryptocurrencies worked. In the face of promises
that TRX would be “similar to Bitcoin,” and considering the new technology at issue and TRON’s
other statements, many investors were understandably unaware that TRX tokens had
fundamentally different features than other cryptocurrencies, which the SEC has determined are
not securities. Many of the other Tokens likewise misleadingly compared themselves to Bitcoin
or Ethereum, which are not required to be registered as securities.
71. The EOS whitepaper, for example, argued that EOS would replace Bitcoin and
Ethereum. The ELF whitepaper discussed, at length, how governance structures for
cryptocurrencies like Bitcoin were “not well defined when [they were] created.” ELF insisted that
its governance structure represented an improvement over cryptocurrencies like Bitcoin and
Ethereum. The OMG whitepaper discussed “Bitcoin and Bitcoin-like systems” and how OMG
would serve as a “clearinghouse” for these type of assets.
72. Accordingly, it was not apparent to a reasonable investor, at issuance, that the
Tokens were securities under the law, and a reasonable investor would not have concluded they
were securities.
73. KuCoin. KuCoin’s public representations suggested to users that its offerings of
tokens did not require registration with the SEC because they did not constitute securities. Gan
has publicly represented that KuCoin is “trying [its] best to be regulated in every market,” which
is why it was able to raise $20 million in Series A funding from “two top VCs, IDG and Matrix.”
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Moreover, KuCoin’s announcements of new token listings have included links to whitepapers
stating, for example, that particular tokens “are not intended to be shares, securities, derivatives or
interests in any managed investment scheme or any other financial products,” and that the issuers
“believe we are taking commercially reasonable steps to ensure that the token sale mechanics and
issue of Tokens do not violate applicable laws and regulations.”
74. SEC. Prior to its April 2019 pronouncement, the SEC too left uncertain whether
tokens, such as the Tokens at issue in the Complaint, are securities. In fact, it was not until six
months after the Framework was issued in April 2019, and more than two years after the relevant
ICO began, that the SEC entered into a settlement with Block.one (the issuer of ERC-20 token
EOS), concluding in September 2019 that EOS’s $4.1 billion issuance constituted an unlawful
unregistered offering.
75. Prior to that time, the SEC had not determined that ERC-20 tokens were securities.
On June 14, 2018, the Director of the Corporation Finance Division, William H. Hinman,
explained that “the ICOs I am seeing, strictly speaking, the token—or coin or whatever the digital
information packet is called—all by itself is not a security.” On May 2, 2018, Commissioner
Hester Peirce similarly expressed her view that not “all ICOs must be deemed securities offerings.”
Critically, Commissioner Peirce identified numerous open questions that Issuers emphasized when
arguing ERC-20 tokens are not securities, such as the utility of the token in an incomplete or
partially complete network.
76. Other Commentary. Other thought leaders in the space, such as the lawfully
registered broker-dealer Coinbase, opined in late 2016 that “we have considered the question of
whether issuance of a Blockchain Token prior to the existence of a system would constitute a
security. We have not found conclusive law on the subject, but believe that the better view is that
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a non-security Blockchain Token does not become a security merely because the system as to
which it has rights has not yet been created or completed.”
77. In sum, before the SEC issued its Framework on April 3, 2019, a reasonable
investor would not have concluded that ERC-20 tokens were generally securities subject to the
securities laws. On the contrary, they were confronted with representations both from issuers and
from cryptocurrency discussions that would have led them reasonably to believe they were not
investing in securities.
G. The Tokens Are Securities
78. Within the last year, the SEC has clarified, with the benefit of labor-intensive
research and investigations, that the Tokens are securities. On April 3, 2019, the SEC published
its “Framework for ‘Investment Contract’ Analysis of Digital Assets,” in which it “provided a
framework for analyzing whether a digital asset is an investment contract and whether offers and
sales of a digital asset are securities transactions.”
79. Among the most significant statements in the Framework is its description of how
to analyze the various facts surrounding ICOs in making the determination of whether a given
digital asset (including an ERC-20 token) is a security. Under application of the Framework, the
Tokens were securities at issuance.
80. In the Framework, the SEC cautioned potential issuers: “If you are considering an
Initial Coin Offering, sometimes referred to as an ‘ICO,’ or otherwise engaging in the offer, sale,
or distribution of a digital asset, you need to consider whether the U.S. federal securities laws
apply.” The SEC explained the fundamentals of the Howey test:
The U.S. Supreme Court’s Howey case and subsequent case law
have found that an “investment contract” exists when there is the
investment of money in a common enterprise with a reasonable
expectation of profits to be derived from the efforts of others. The
so-called “Howey test” applies to any contract, scheme, or
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transaction, regardless of whether it has any of the characteristics of

typical securities. The focus of the Howey analysis is not only on
the form and terms of the instrument itself (in this case, the digital
asset) but also on the circumstances surrounding the digital asset and
the manner in which it is offered, sold, or resold (which includes
secondary market sales). Therefore, issuers and other persons and
entities engaged in the marketing, offer, sale, resale, or distribution
of any digital asset will need to analyze the relevant transactions to
determine if the federal securities laws apply.
Investors who bought the Tokens invested money or other valuable consideration, such as bitcoin
and ether, in a common enterprise—the Issuers. Investors had a reasonable expectation of profit
based upon the efforts of the Issuers, including, among other things, the Issuers obtaining listing
of their ERC-20 tokens on cryptocurrency exchanges such as KuCoin.
1. Under The SEC’s April 2019 Framework, The Tokens Are Securities
a. ERC-20 Investors Invested Money
81. Investors in ERC-20 tokens made an investment of money or other valuable
consideration for purposes of Howey. The SEC Framework states: “The first prong of the Howey
test is typically satisfied in an offer and sale of a digital asset because the digital asset is purchased
or otherwise acquired in exchange for value, whether in the form of real (or fiat) currency, another
digital asset, or other type of consideration.”
82. Investors invested traditional and other digital currencies, such as bitcoin and ether,
to purchase the Tokens. The Tokens were listed on KuCoin, and KuCoin permitted investors to
purchase ICOs with bitcoin and ether.
b. ERC-20 Investors Participated In A Common Enterprise
83. The SEC Framework states: “In evaluating digital assets, we have found that a
‘common enterprise’ typically exists.” This is “because the fortunes of digital asset purchasers
have been linked to each other or to the success of the promoter’s efforts.”
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84. The Tokens are no different. Investors were passive participants in the Tokens’
ICOs and the profits of each investor were intertwined with those of the Issuers and of other
investors. Issuers typically conceded in their whitepapers that they sold Tokens in order to fund
their operations and promote their networks and thereby increase the value of the issued ERC-20
tokens. Issuers typically were responsible for supporting the Tokens, pooled investors’ assets, and
controlled those assets. Issuers would also typically hold a significant stake in the Tokens, and
thus shared in the profits and risk of the project.
85. For example, promoters of the EOS token described the proceeds of their ICO as
“revenue” they would use to “offer[] developers and entrepreneurs the funding they need to create
community driven business leveraging EOSIO software.” That money, in return, “will be returned
value for the network.” For the other Tokens as well, investors participated in a common enterprise
by purchasing the Tokens.
c. Investors Purchased The Tokens With A Reasonable Expectation Of

Profit From Owning Them
86. As to “reasonable expectation of profits,” the SEC Framework states: “A purchaser
may expect to realize a return through participating in distributions or through other methods of
realizing appreciation on the asset, such as selling at a gain in a secondary market.”
87. Investors in the Tokens, including Plaintiff and the Class, made their investment
with a reasonable expectation of profits. The Tokens were sold to investors prior to a network or
“ecosystem” on which they could be used being fully developed. For pre-functional tokens, such
as the Tokens at issue in the Complaint, the primary purpose for purchasing such Tokens was to
make a profit, rather than to utilize the Tokens themselves for a task.
88. Alluding to the “AP” (the “Active Participant”), which is the promoter, sponsor, or
other third party that “provides essential managerial efforts that affect the success of the
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enterprise,” the Framework identifies a series of factually intense questions underscoring both the
time the SEC had spent considering these issues and the challenges a layperson would face in
analyzing whether a digital asset constitutes a security. In particular, the Framework lays out a
number of characteristics to assess whether the “reasonable expectation of profits” element is met
with respect to whether digital assets thereby satisfy the Howey test:
The more the following characteristics are present, the more likely it is that there is
a reasonable expectation of profit:
• The digital asset gives the holder rights to share in the enterprise’s income
or profits or to realize gain from capital appreciation of the digital asset.
o The opportunity may result from appreciation in the value of the digital
asset that comes, at least in part, from the operation, promotion,
improvement, or other positive developments in the network,
particularly if there is a secondary trading market that enables digital
asset holders to resell their digital assets and realize gains.
o This also can be the case where the digital asset gives the holder rights
to dividends or distributions.
• The digital asset is transferable or traded on or through a secondary market

or platform, or is expected to be in the future.
• Purchasers reasonably would expect that an AP’s efforts will result in

capital appreciation of the digital asset and therefore be able to earn a return
on their purchase.
• The digital asset is offered broadly to potential purchasers as compared to

being targeted to expected users of the goods or services or those who have
a need for the functionality of the network.
o The digital asset is offered and purchased in quantities indicative of

investment intent instead of quantities indicative of a user of the
network. For example, it is offered and purchased in quantities
significantly greater than any likely user would reasonably need, or so
small as to make actual use of the asset in the network impractical.
• There is little apparent correlation between the purchase/offering price of

the digital asset and the market price of the particular goods or services that
can be acquired in exchange for the digital asset.
• There is little apparent correlation between quantities the digital asset

typically trades in (or the amounts that purchasers typically purchase) and
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the amount of the underlying goods or services a typical consumer would

purchase for use or consumption.
• The AP has raised an amount of funds in excess of what may be needed to

establish a functional network or digital asset.
• The AP is able to benefit from its efforts as a result of holding the same
class of digital assets as those being distributed to the public.
• The AP continues to expend funds from proceeds or operations to enhance

the functionality or value of the network or digital asset.
• The digital asset is marketed, directly or indirectly, using any of the

following:
o The expertise of an AP or its ability to build or grow the value of the

network or digital asset.
o The digital asset is marketed in terms that indicate it is an investment or

that the solicited holders are investors.
o The intended use of the proceeds from the sale of the digital asset is to
develop the network or digital asset.
o The future (and not present) functionality of the network or digital asset,
and the prospect that an AP will deliver that functionality.
o The promise (implied or explicit) to build a business or operation as

opposed to delivering currently available goods or services for use on
an existing network.
o The ready transferability of the digital asset is a key selling feature.
o The potential profitability of the operations of the network, or the

potential appreciation in the value of the digital asset, is emphasized in
marketing or other promotional materials.
o The availability of a market for the trading of the digital asset,

particularly where the AP implicitly or explicitly promises to create or
otherwise support a trading market for the digital asset.
89. The SEC Framework clarifies that investors purchased the Tokens with a
reasonable expectation of profits.
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90. For example, the “ready transferability of the” Tokens was promoted by Issuers as
a “key selling feature.” The Status Network, for instance, told investors the SNT tokens “will be
transferrable 7 days after the end of the Contribution Period.”
91. The Tokens also “emphasized” the “potential appreciation in the value of the digital
asset” in their marketing materials.
92. The Tokens were not described as “delivering currently available goods or services
for use on an existing network,” but rather explained as raising capital necessary “to build a
business or operation.” The whitepaper for the aelf Token, for example, promised to bring about
“the next phase” and a “new paradigm” of blockchain technology, and acknowledged that
“[b]uilding an ecosystem requires a large amount of capital,” including “the funds raised during
the Token sale.” Under the SEC’s April 2019 Framework, the Tokens are securities under federal
and state securities laws.
d. Investors Expected Profits From The Tokens To Be Derived From The

Managerial Efforts Of Issuers
93. The SEC Framework provides that the “inquiry into whether a purchaser is relying
on the efforts of others focuses on two key issues: Does the purchaser reasonably expect to rely
on the efforts of an [Active Participant]? Are those efforts ‘the undeniably significant ones, those
essential managerial efforts which affect the failure or success of the enterprise,’ as opposed to
efforts that are more ministerial in nature?”
94. Investors’ profits in the Tokens were to be derived from the managerial efforts of
others—specifically the Issuers, their co-founders, and their development teams. ERC-20
investors relied on the managerial and entrepreneurial efforts of the Issuers and their executive and
development teams to manage and develop the projects funded by the Tokens’ ICOs.
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95. Issuers’ executive teams typically held themselves out to investors as experts in the
blockchain and crypto field. Investors in the Tokens reasonably expected the Issuers’ development
teams to provide significant managerial efforts after the Tokens’ launch.
96. The SEC explained, further underlining the depth of study the agency had devoted
to the matter over the years and the complexity of such legal analysis from the perspective of a
reasonable investor, that the more of the following characteristics that are present, “the more likely
it is that a purchaser of a digital asset is relying on the ‘efforts of others’”:
• An AP is responsible for the development, improvement (or enhancement),

operation, or promotion of the network, particularly if purchasers of the
digital asset expect an AP to be performing or overseeing tasks that are
necessary for the network or digital asset to achieve or retain its intended
purpose or functionality.
o Where the network or the digital asset is still in development and
the network or digital asset is not fully functional at the time of
the offer or sale, purchasers would reasonably expect an AP to
further develop the functionality of the network or digital asset
(directly or indirectly). This particularly would be the case
where an AP promises further developmental efforts in order for
the digital asset to attain or grow in value.
• There are essential tasks or responsibilities performed and expected to be
performed by an AP, rather than an unaffiliated, dispersed community of
network users (commonly known as a “decentralized” network).
• An AP creates or supports a market for, or the price of, the digital asset.
This can include, for example, an AP that: (1) controls the creation and
issuance of the digital asset; or (2) takes other actions to support a market
price of the digital asset, such as by limiting supply or ensuring scarcity,
through, for example, buybacks, “burning,” or other activities.
• An AP has a lead or central role in the direction of the ongoing development
of the network or the digital asset. In particular, an AP plays a lead or
central role in deciding governance issues, code updates, or how third
parties participate in the validation of transactions that occur with respect to
the digital asset.
• An AP has a continuing managerial role in making decisions about or
exercising judgment concerning the network or the characteristics or rights
the digital asset represents including, for example:
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o Determining whether and how to compensate persons providing

services to the network or to the entity or entities charged with
oversight of the network.
o Determining whether and where the digital asset will trade. For
example, purchasers may reasonably rely on an AP for liquidity,
such as where the AP has arranged, or promised to arrange for,
the trading of the digital asset on a secondary market or platform.
o Determining who will receive additional digital assets and under
what conditions.
o Making or contributing to managerial level business decisions,
such as how to deploy funds raised from sales of the digital asset.
o Playing a leading role in the validation or confirmation of
transactions on the network, or in some other way having
responsibility for the ongoing security of the network.
o Making other managerial judgements or decisions that will
directly or indirectly impact the success of the network or the
value of the digital asset generally.
• Purchasers would reasonably expect the AP to undertake efforts to promote
its own interests and enhance the value of the network or digital asset, such
as where:
o The AP has the ability to realize capital appreciation from the
value of the digital asset. This can be demonstrated, for
example, if the AP retains a stake or interest in the digital asset.
In these instances, purchasers would reasonably expect the AP
to undertake efforts to promote its own interests and enhance the
value of the network or digital asset.
o The AP distributes the digital asset as compensation to
management or the AP’s compensation is tied to the price of the
digital asset in the secondary market. To the extent these facts
are present, the compensated individuals can be expected to take
steps to build the value of the digital asset.
o The AP owns or controls ownership of intellectual property
rights of the network or digital asset, directly or indirectly.
o The AP monetizes the value of the digital asset, especially where
the digital asset has limited functionality.
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97. Shifting its focus to the numerous facts bearing on the nature of the digital asset at
issue, the SEC explained still further:
Although no one of the following characteristics of use or consumption is

necessarily determinative, the stronger their presence, the less likely the Howey test
is met:
• The distributed ledger network and digital asset are fully developed and
operational.
• Holders of the digital asset are immediately able to use it for its intended
functionality on the network, particularly where there are built-in
incentives to encourage such use.
• The digital assets’ creation and structure is designed and implemented

to meet the needs of its users, rather than to feed speculation as to its
value or development of its network. For example, the digital asset can
only be used on the network and generally can be held or transferred
only in amounts that correspond to a purchaser’s expected use.
• Prospects for appreciation in the value of the digital asset are limited.
For example, the design of the digital asset provides that its value will
remain constant or even degrade over time, and, therefore, a reasonable
purchaser would not be expected to hold the digital asset for extended
periods as an investment.
• With respect to a digital asset referred to as a virtual currency, it can

immediately be used to make payments in a wide variety of contexts, or
acts as a substitute for real (or fiat) currency.
o This means that it is possible to pay for goods or services with the
digital asset without first having to convert it to another digital asset
or real currency.
o If it is characterized as a virtual currency, the digital asset actually

operates as a store of value that can be saved, retrieved, and
exchanged for something of value at a later time.
• With respect to a digital asset that represents rights to a good or service,

it currently can be redeemed within a developed network or platform to
acquire or otherwise use those goods or services. Relevant factors may
include:
o There is a correlation between the purchase price of the digital asset

and a market price of the particular good or service for which it may
be redeemed or exchanged.
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o The digital asset is available in increments that correlate with a

consumptive intent versus an investment or speculative purpose.
o An intent to consume the digital asset may also be more evident if

the good or service underlying the digital asset can only be acquired,
or more efficiently acquired, through the use of the digital asset on
the network.
• Any economic benefit that may be derived from appreciation in the

value of the digital asset is incidental to obtaining the right to use it for
its intended functionality.
• The digital asset is marketed in a manner that emphasizes the

functionality of the digital asset, and not the potential for the increase in
market value of the digital asset.
• Potential purchasers have the ability to use the network and use (or have
used) the digital asset for its intended functionality.
• Restrictions on the transferability of the digital asset are consistent with

the asset’s use and not facilitating a speculative market.
• If the AP facilitates the creation of a secondary market, transfers of the

digital asset may only be made by and among users of the platform.
98. Purchasers of pre-functional tokens, such as the Tokens, necessarily rely on the
managerial efforts of others to realize value from their investments. The success of these
managerial efforts in developing the networks on which these tokens will operate is the primary
factor in their price, that is, until such tokens transition into being functional utility tokens. Each
of the Tokens was a security at issuance because profit from the Tokens would be derived primarily
from the managerial efforts of the Issuer teams developing the associated networks on which the
Tokens would function, rather than having their profit derived from market forces of supply and
demand, such as might affect the price of a commodity such as gold (or Bitcoin).
99. This dependency, however, on the managerial efforts of the Issuer was not apparent
at issuance to a reasonable investor. Considering the limited available information about how
these Tokens were designed and intended to operate, if such an investor were even able to interpret
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the relevant law at the time, a reasonable investor lacked sufficient bases to conclude whether the
Tokens were securities until the platform at issue, and its relevant “ecosystem,” had been given
time to develop. In the interim, the investor lacked the facts necessary to conclude—let alone
formally allege in court—that the tokens she had acquired were securities. It was only after the
passage of some significant amount of time, and only with more information about the Issuer’s
intent, process of management, and lack of success in allowing decentralization to arise, that an
investor could reasonably determine that a token that was advertised as something other than a
security was a security all along.
100. The EOS Token is a prime example. At the time of the EOS ICO, EOS had no
functional software product available—instead, EOS told its investors it would use the proceeds
of the ICO to develop the promised software, which would in turn make the Tokens more valuable
to investors.
101. The Issuers of the Status SNT Tokens likewise wrote in its whitepaper it had only
an “alpha” build of its product, but with the funds raised through its ICO, it hoped its technology
would “reach[] widespread mobile use.” The whitepaper continued: “Funds raised during the
Contribution Period will be used solely for the development and benefit of the Status Network.”
102. However complex the resolution of the issue would strike a reasonable investor, the
Tokens satisfy most if not all of the factors the SEC described in the Framework as relevant to its
determination that a digital asset is a security.
2. Each Token Is A Security
a. EOS
103. The EOS ICO has been widely reported as the largest ICO to date, having raised
over $4 billion assets from the sale of unregistered EOS tokens from June 2017 through July 2018.
EOS tokens have been listed on KuCoin since at least October 14, 2017.
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104. EOS tokens were advertised as being an improvement on Bitcoin, Ethereum, and
other cryptocurrencies. In addition to claiming EOS’s technical superiority over other
cryptocurrencies, EOS’s issuer, Block.one, publicly stated that it would use the funds raised
through the ICO to continue to enhance the EOS software and support the growth of the platform.
105. In the EOS Token Purchase Agreement, the issuers of EOS tokens made the
following representations concerning the development of EOSIO:
106. At the time of the EOS ICO, Block.one took advantage of the market’s lack of
understanding and awareness concerning how cryptocurrencies worked. With promises that EOS
would be better than other cryptocurrencies, many individuals were unaware that EOS tokens had
fundamentally different features than other cryptocurrencies, including being more centralized
than Bitcoin or Ethereum. One of these primary differences is that all EOS tokens were issued by
Block.one at creation at very little economic cost—and enormous potential upside—to the
Block.one founders.
107. The creation of EOS tokens thus occurred through a centralized process, in contrast
to Bitcoin and Ethereum. This would not have been apparent at issuance, however, to a reasonable
investor. Rather, it was only after the passage of time and disclosure of additional information
about the issuer’s intent, process of management, and success in allowing decentralization to arise
that a reasonable purchaser could know that he or she had acquired a security. Purchasers were
thereby misled into believing that EOS was something other than a security, when it was a security.
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108. Investors purchased EOS tokens with the reasonable expectation that they would
make a profit.
109. EOS token holders stood to share in potential profits from the successful launch of
the EOS token. A reasonable investor would have been motivated, at least in part, by the prospect
of profits on their investment in the EOS ecosystem.
110. EOS tokens were described as a technologically superior version of the Bitcoin and
Ethereum blockchains. The issuers’ statements fueled speculation that EOS was the next
“Ethereum or Bitcoin,” with one commentator referring to EOS as “The Ethereum Killer.”
111. Investors’ profits were to be derived from the managerial efforts of others—
Block.one, its co-founders, and the Block.one development team. Investors in EOS relied on the
managerial and entrepreneurial efforts of Block.one and its executive and development team to
manage and develop the EOS software.
112. Investors in EOS reasonably expected Block.one and Block.one’s development
team to provide significant managerial efforts after EOS’s launch.
113. The expertise of the issuers was critical in monitoring the operation of EOS,
promoting EOS, and deploying investor funds. Investors had little choice but to rely on their
expertise. The EOS protocol and governance structure were predetermined before the ICO was
launched.
114. Accordingly, under the SEC’s Framework, the EOS token was a security.
115. Indeed, on September 30, 2019, the SEC found that Block.one had violated the
Securities Act through its unregistered sale of EOS to U.S. investors. Among the SEC’s
conclusions were the following:
• “A number of US investors participated in Block.one’s ICO.”
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• “Companies that offer or sell securities to US investors must comply with the
securities laws, irrespective of the industry they operate in or the labels they place
on the investment products they offer.”
• “Block.one did not provide ICO investors the information they were entitled to as
participants in a securities offering.”
• “[EOS] Tokens were securities under the federal securities laws.”
• “A purchaser in the offering of [EOS] Tokens would have had a reasonable

expectation of obtaining a future profit based upon Block.one’s efforts, including
its development of the EOSIO software and its promotion of the adoption and
success of EOSIO and the launch of the anticipated EOSIO blockchains.”
• “Block.one violated Sections 5(a) and 5(c) of the Securities Act by offering and
selling these securities without having a registration statement filed or in effect with
the Commission or qualifying for an exemption from registration.”
Block.one consented to a settlement whereby it would pay $24 million to the SEC. This
enforcement action occurred over two years after Block.one began selling EOS to the public,
further underscoring the complexity of these issues for lay investors.
116. The SEC’s September 30, 2019 settlement with Block.one reflected the SEC’s
Framework for analyzing whether digital assets, and in particular ERC-20 tokens, constitute
securities. Consistent with that Framework, the SEC determined that EOS tokens are securities
and that Block.one had violated the Securities Act by failing to register them.
117. The SEC’s determination that EOS was and is a security applies not only to EOS,
but also to each of the other digital tokens discussed below.
b. Status (SNT)
118. Status Network’s (“Status”) SNT token ICO has been widely reported as one of the
largest ICOs to date, having raised over $100 million in assets from the sale of unregistered SNT
tokens over a 24-hour period from June 20 to June 21, 2017.
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for mass adoption,” and that the “core team and the Status community are committed to ensuring
that the SNT token adds value to the platform and drives network effects.”
123. At the time of the SNT ICO, Status took advantage of the market’s lack of
understanding and awareness concerning how cryptocurrencies worked. With representations that
SNT would be similar to other cryptocurrencies, many individuals were unaware that SNT tokens
had fundamentally different features than other cryptocurrencies, including being more centralized
than Bitcoin or Ethereum. One of these primary differences is that all SNT tokens were issued by
Status at creation at very little economic cost—and enormous potential upside—to the Status
founders, Jarrad Hope and Carl Bennetts.
124. The creation of SNT tokens thus occurred through a centralized process, in contrast
to Bitcoin and Ethereum, which increase through a decentralized process as numerous users
engage in mining and other efforts to build the ecosystem. Although the centralized process by
which SNT tokens were created is relevant for determining that they are securities, it was only
after the passage of time and disclosure of additional information about the issuer’s intent, process
of management, and success, or lack thereof, in allowing decentralization in its network to arise
thereby misled into believing that SNT was something other than a security, when it was a security.
125. Investors purchased SNT tokens with the reasonable expectation that they would
make a profit.
126. SNT token holders stood to share in potential profits from the successful launch of
the SNT token. A reasonable investor would have been motivated, at least in part, by the prospect
of profits on their investment in the SNT ecosystem.
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127. Investors’ profits were to be derived from the managerial efforts of others—Status,
its co-founders, Hope and Bennetts, and the Status development team. Investors in SNT relied on
the managerial and entrepreneurial efforts of Status and its executive and development team to
manage and develop the SNT software. Indeed, both Hope’s and Bennett’s biographies were
featured in the Status whitepaper and were held out to be integral parts of the success of SNT. The
whitepaper emphasized that “Carl and Jarrad, the co-founders of Status, have had a working
relationship for 6 years on various projects, and 3 of those years were spent operating a software
distribution network, driving over 20 million installs to various software offerings, the profits of
which were used to fund Status and our team of 10 until this point. During the operation of this
business we were uniquely positioned to see firsthand how personal data on the internet is bought
and sold and how users are acquired and retained.”
128. Investors in SNT thus reasonably expected Status, co-founders Hope and Bennetts,
and Status’s development team to provide significant managerial efforts after SNT’s launch.
129. The expertise of the issuers was critical in monitoring the operation of SNT,
promoting SNT, and deploying investor funds. Investors had little choice but to rely on their
expertise. The SNT protocol and governance structure were predetermined before the ICO was
launched.
130. Accordingly, under the SEC’s Framework, the SNT token was and is a security.
c. Quantstamp (QSP)
131. The QSP ICO raised over $31 million in assets from the sale of unregistered QSP
tokens over a period of time that extended from November 17 to November 19, 2017.
132. After being distributed through the ICO, the issuer of QSP, Quantstamp, listed
QSP tokens on KuCoin since at least November 29, 2017.
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136. In addition to comparing QSP tokens to other cryptocurrencies and characterizing
Quantstamp as “extending Ethereum,” Quantstamp publicly stated that it would use the funds
raised through the ICO to continue to develop the Quantstamp protocol software.
137. At the time of the QSP ICO, Quantstamp took advantage of the market’s lack of
understanding and awareness concerning how cryptocurrencies worked. With comparisons to
other cryptocurrencies, many individuals were unaware that QSP tokens had fundamentally
different features than other cryptocurrencies, including being more centralized than Bitcoin or
Ethereum. One of these primary differences is that all QSP tokens were issued by Quantstamp at
creation at very little economic cost—and enormous potential upside—to the Quantstamp
founders.
138. The creation of QSP tokens thus occurred through a centralized process, in contrast
which QSP tokens were created is relevant for determining that they are securities, it was only
thereby misled into believing that QSP was something other than a security, when it was a security.
139. And the QSP whitepaper explicitly stated that the QSP tokens were “not intended
to constitute securities in any jurisdiction”—investors thus reasonably understood that QSP was
not subject, at issuance, to U.S. securities laws.
140. Investors purchased QSP tokens with the reasonable expectation that they would
make a profit.
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141. QSP token holders stood to share in potential profits from the successful launch of
the QSP token. A reasonable investor would have been motivated, at least in part, by the prospect
of profits on their investment in the Quantstamp ecosystem.
142. The QSP whitepaper speculated that Quantstamp expected “every Ethereum smart
contract to use the Quantstamp protocol to perform a security audit because security is essential.”
Quantstamp represented that since contract creators would “pay QSP tokens to get their smart
contract verified,” then as “the number of smart contracts grows exponentially, we expect demand
from Contract Creators to grow commensurately.” Quantstamp’s statements fueled speculation
that “[t]here is a very large potential for [Quantstamp co-founder] Richard [Ma] to lead the product
to a 9 or 10 figure value in a very short time frame . . . . The ICO valuation offers outstanding
value given the massive and probable growth they have planned.” And investors were
participating in a common enterprise with Quantstamp, since any profits were intertwined with the
success of Quantstamp and other investors.
Quantstamp, its co-founders, and the Quantstamp development team. The QSP whitepaper
advertises on its cover page that the Quantstamp “team is made of [sic] up of software testing
experts who collectively have over 500 Google Scholar citations.” Investors in QSP relied on the
managerial and entrepreneurial efforts of Quantstamp and its executive and development team to
manage and develop the Quantstamp protocol software.
144. Investors in QSP reasonably expected Quantstamp and Quantstamp’s development
team to provide significant managerial efforts after QSP’s launch.
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152. In the KNC whitepaper, for example, the issuers of KNC tokens made the following
representation: “The collected KNC tokens from the fees, after paying for the operation expenses
and to the supporting partners, will be burned, i.e. taken out of circulation. The burning of tokens
could potentially increase the appreciation of the remaining KNC tokens as the total supply in
circulation reduces.”
153. At the time of the KNC ICO, Kyber Network took advantage of the market’s lack
of understanding and awareness concerning how cryptocurrencies worked. With promises that
KNC would be better than other cryptocurrencies, many individuals were unaware that KNC
tokens had fundamentally different features than other cryptocurrencies, including being more
centralized than Bitcoin or Ethereum. One of these primary differences is that all KNC tokens
were issued by Kyber Network at creation at very little economic cost—and enormous potential
upside—to the Kyber Network founders. Approximately 39 percent of the KNC tokens minted
into circulated were reserved for the company and its founders and advisors.
154. The creation of KNC tokens thus occurred through a centralized process, in contrast
which KNC tokens were created is relevant for determining that they are securities, it was only
thereby misled into believing that KNC was something other than a security, when it was a
security.
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155. Investors purchased KNC tokens with the reasonable expectation that they would
make a profit.
156. KNC token holders stood to share in potential profits from the successful launch of
the KNC token. A reasonable investor would have been motivated, at least in part, by the prospect
of profits on their investment in the KNC ecosystem.
157. KNC tokens were described as a technologically superior version of the Bitcoin
and Ethereum blockchains.
158. Investors’ profits were to be derived from the managerial efforts of others—Kyber
Network, its co-founders, and the Kyber Network development team. Investors in KNC relied on
the managerial and entrepreneurial efforts of Kyber Network and its executive and development
team to manage and develop the KNC software.
159. Investors in KNC reasonably expected Kyber Network and Kyber Network’s
development team to provide significant managerial efforts after KNC’s launch.
160. The expertise of the issuers was critical in monitoring the operation of KNC,
promoting KNC, and deploying investor funds. Investors had little choice but to rely on their
expertise. The KNC protocol and governance structure were predetermined before the ICO was
launched.
161. Accordingly, under the SEC’s Framework, the KNC token was and is a security.
e. TRON (TRX)
162. The TRX ICO took place in August 2017 and raised approximately $70 million
over a three-day period through the sale of 35 percent of unregistered TRX tokens.
163. On August 28, 2018, TRX’s issuer, TRON, listed the TRX token on KuCoin:
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On this basis, and the others described below, investors reasonably understood that TRX was not
subject, at issuance, to U.S. securities laws.
166. TRON promoted TRX as being similar to Bitcoin. The TRON whitepaper asserted,
as examples, that its “distributed user registration mechanism is as secure as Bitcoin”; “the number
of blocks generated per hour is automatically set by the system, which is similar to the Bitcoin
network”; and “[s]imilar to Bitcoin,” “[t]he [TRON] market is based on blockchain and trade in
virtual currency.” By contrast, TRON issued nearly all of the TRX tokens up front, at very little
economic cost—and enormous potential upside—to TRON’s founders.
167. The creation of TRX tokens thus occurred through a centralized process, in contrast
which TRX tokens were created is relevant for determining that they are securities, it was only
thereby misled into believing that TRX was something other than a security, when it was a security.
168. Investors purchased TRX tokens with the reasonable expectation that they would
make a profit.
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169. TRX token holders stood to share in potential profits from the successful launch of
the TRX token. A reasonable investor would have been motivated, at least in part, by the prospect
of profits on their investment in the TRX ecosystem.
170. Investors’ profits were to be derived from the managerial efforts of others—the
TRON Foundation, its co-founders, and the development team. Investors in TRX relied on the
managerial and entrepreneurial efforts of the TRON Foundation and its executive and development
team to manage and develop the TRX software.
171. Investors in TRX reasonably expected the TRON Foundation and the TRON
Foundation’s development team to provide significant managerial efforts after TRX’s launch.
172. The expertise of the TRON Foundation was critical in monitoring the operation of
TRX, promoting TRX, and deploying investor funds. Investors had little choice but to rely on
their expertise. The TRX protocol and governance structure were predetermined before the ICO
was launched.
173. Accordingly, under the SEC’s Framework, the TRX token was and is a security.
f. OmiseGo (OMG)
174. OmiseGO sold approximately 65 percent of its unregistered OMG Tokens to
investors through its ICO on September 9, 2017, raising $25 million over a one-day period.
175. In June 2017, OmiseGO published the “OmiseGO whitepaper.” The OMG
whitepaper asserted that OmiseGO was building a “decentralized exchange, liquidity provider
mechanism, clearinghouse messaging network, and asset-backed blockchain gateway.” As part of
this system, OmiseGO announced the OMG token. According to the whitepaper, “[o]wning OMG
tokens buys the right to validate this blockchain, within its consensus rules.”
176. The OMG whitepaper was silent as to the regulatory nature of OMG tokens.
Instead, the whitepaper discussed, at length, “Bitcoin and Bitcoin-like systems” and how OMG
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OMG were issued by OmiseGO at creation at very little economic cost—and enormous potential
upside—to the OmiseGO founders.
181. The creation of OMG tokens thus occurred through a centralized process, in
contrast to Bitcoin and Ethereum, which increase through a decentralized process as numerous
users engage in mining and other efforts to build the ecosystem. Although the centralized process
by which OMG tokens were created is relevant for determining that they are securities, it was only
thereby misled into believing that OMG was something other than a security, when it was a
security.
182. Investors purchased OMG tokens with the reasonable expectation that they would
make a profit.
183. OmiseGO token holders stood to share in potential profits from the successful
launch of the OMG token. A reasonable investor would have been motivated, at least in part, by
the prospect of profits on their investment in the OMG ecosystem.
OmiseGO, its co-founders, and OmiseGO development team. Investors in OMG relied on the
managerial and entrepreneurial efforts of OmiseGO and its executive and development team to
manage and develop the OMG software.
185. Investors in OMG reasonably expected OmiseGO and its development team to
provide significant managerial efforts after OMG’s launch.
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supposed relationship to Ethereum and Bitcoin, investors reasonably understood that LEND was
194. At the time of the LEND ICO, ETHLend took advantage of the market’s lack of
understanding and awareness concerning how cryptocurrencies worked. Many individuals were
unaware that LEND had fundamentally different features than other cryptocurrencies, including
being more centralized than Bitcoin or Ethereum. One of these primary differences is that all
LEND were issued by ETHLend at creation at very little economic cost—and enormous potential
upside—to the ETHLend founders.
195. The creation of LEND tokens thus occurred through a centralized process, in
users engage in mining and other efforts to build the ecosystem. Although the centralized process
by which LEND tokens were created is relevant for determining that they are securities, it was
only after the passage of time and disclosure of additional information about the issuer’s intent,
process of management, and success, or lack thereof, in allowing decentralization in its network
to arise that a reasonable purchaser could know that he or she had acquired a security. Purchasers
were thereby misled into believing that LEND was something other than a security when it was a
security.
196. Investors purchased LEND tokens with the reasonable expectation that they would
make a profit.
197. LEND token holders stood to share in potential profits from the successful launch
of the LEND token. A reasonable investor would have been motivated, at least in part, by the
prospect of profits on their investment in the LEND ecosystem.
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ETHLend, its co-founders, and the ETHLend development team. Investors in LEND relied on the
managerial and entrepreneurial efforts of LEND and its executive and development team to
manage and develop the LEND software.
199. Investors in LEND reasonably expected ETHLend and the ETHLend development
team to provide significant managerial efforts after LEND’s launch.
200. The expertise of ETHLend was critical in monitoring the operation of LEND,
promoting LEND, and deploying investor funds. Investors had little choice but to rely on their
expertise. The LEND protocol and governance structure were predetermined before the ICO was
launched.
201. Accordingly, under the SEC’s Framework, the LEND token was and is a security.
h. aelf (ELF)
202. In December 2017, aelf sold 25 percent of its unregistered ELF tokens to investors
through private placement, raising $25 million.
203. In November 2017, aelf published the “aelf whitepaper.” The whitepaper
“envision[ed] aelf as a highly efficient and customizable OS and [that would] l become the ‘Linux
system’ in [the] Blockchain community.” As part of this system, aelf announced the ELF token.
According to the whitepaper, “[ELF] Token holders have the greatest right in the future of aelf,
and token holders’ interests are linked with the destiny of aelf, in particular those with long-term
locked-in tokens in particular.”
204. The aelf whitepaper was silent as to the regulatory nature of ELF tokens. Instead,
the whitepaper discussed, at length, how governance structures for cryptocurrencies like Bitcoin
were “not well defined when [they were] created.” aelf insisted that its governance structure
represented an improvement over cryptocurrencies like Bitcoin and Ethereum because “vital
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207. At 10:00 a.m. today, the ELF token traded at approximately 6 cents.
208. At the time of the ELF ICO, aelf took advantage of the market’s lack of
unaware that ELF had fundamentally different features than other cryptocurrencies, including
being more centralized than Bitcoin or Ethereum. One of these primary differences is that all ELF
were issued by aelf at creation at very little economic cost—and enormous potential upside—to
the aelf founders.
209. The creation of ELF tokens thus occurred through a centralized process, in contrast
which ELF tokens were created is relevant for determining that they are securities, it was only
thereby misled into believing that ELF was something other than a security, when it was a security.
210. Investors purchased ELF tokens with the reasonable expectation that they would
make a profit.
211. The aelf token holders stood to share in potential profits from the successful launch
of the ELF token. A reasonable investor would have been motivated, at least in part, by the
prospect of profits on their investment in the ELF ecosystem.
212. Investors’ profits were to be derived from the managerial efforts of others—aelf,
its co-founders, and aelf’s development team. Investors in ELF relied on the managerial and
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entrepreneurial efforts of aelf and its executive and development team to manage and develop the
ELF software.
213. Investors in ELF reasonably expected aelf and its development team to provide
significant managerial efforts after ELF’s launch.
214. The expertise of aelf was critical in monitoring the operation of ELF, promoting
ELF, and deploying investor funds. Investors had little choice but to rely on their expertise. The
ELF protocol and governance structure were predetermined before ELF was launched.
215. Accordingly, under the SEC’s Framework, the ELF token was and is a security.
i. CIVIC (CVC)
216. Over its two-day ICO, from June 20-21, 2017, Civic raised approximately $33
million in proceeds from the sale of 33 percent of CVC tokens. Civic retained 33 percent of those
tokens and allocated an additional 33 percent “for distribution to incentivize participation in the
ecosystem.”
217. In June 2017, Civic published the first version of the “Civic whitepaper.” In its
whitepaper, Civic stated that it was “building an ecosystem that is designed to facilitate on-
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demand, secure and low-cost access to identity verification (‘IDV’) services via the blockchain,
such that background and personal information verification checks will no longer need to be
undertaken from the ground up every time.” It also introduced, for the first time, the CVC token
“that participants in the ecosystem will use to transact in IDV-related services.”
218. After CVC tokens were distributed through the ICO, CVC tokens have been listed
on KuCoin since at least December 13, 2017.
219. The Civic Purchase Agreement stated that “[CVC] Tokens are not intended to be a
digital currency, security, commodity, or any kind of financial instrument” and that “[CVC]
Tokens do not represent or confer any ownership right or stake, share, security, or equivalent
rights, or any right to receive future revenue shares, intellectual property rights or any other form
of participation in or relating to the Ecosystem and/or Company and its corporate affiliates.”
220. Investors thus reasonably understood that CVC was not subject, at issuance, to U.S.
securities laws.
221. At the time of the CVC ICO, Civic took advantage of the market’s lack of
unaware that CVC had fundamentally different features than other cryptocurrencies, including
being more centralized than Bitcoin or Ethereum. One of these primary differences is that all CVC
were issued by Civic at creation at very little economic cost—and enormous potential upside—to
the Civic founders.
222. The creation of CVC tokens thus occurred through a centralized process, in contrast
which CVC tokens were created is relevant for determining that they are securities, it was only
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thereby misled into believing that CVC was something other than a security, when it was a security.
223. Investors purchased CVC tokens with the reasonable expectation that they would
make a profit.
224. CVC token holders stood to share in potential profits from the successful launch of
the CVC token. A reasonable investor would have been motivated, at least in part, by the prospect
of profits on their investment in the CVC ecosystem.
225. Investors’ profits were to be derived from the managerial efforts of others—Civic,
its co-founders, and the CVC development team. Investors in CVC relied on the managerial and
entrepreneurial efforts of Civic and its executive and development team to manage and develop
the CVC software.
226. Investors in CVC reasonably expected Civic and its development team to provide
significant managerial efforts after CVC launch.
227. The expertise of Civic was critical in monitoring the operation of CVC, promoting
CVC, and deploying investor funds. Investors had little choice but to rely on their expertise. The
CVC protocol and governance structure were predetermined before the ICO was launched.
228. Accordingly, under the SEC’s Framework, the CVC token was and is a security.
j. TomoChain (TOMO)
229. TomoCoin (“TOMO”) was launched through use of the ERC-20 protocol. At
launch, 100 million tokens were created through use of the ERC-20 protocol.
230. Tomochain PTE Ltd. (“TomoChain”), TOMO’s issuer, sold 34 percent of TOMO
tokens to investors through its ICO, raising approximately $8.5 million over a three-day period.
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231. On May 24, 2018, KuCoin announced and promoted the listing of TOMO on its
exchange:
232. In June 2018, Tomochain published the “TomoChain whitepaper.” TomoChain
casted itself as a “a blockchain infrastructure framework, which is an open-source, high
performance, nearly zero (economically) fee and instant confirmation blockchain that can
process billions of financial transactions per day.” The whitepaper also introduced TOMO,
which it advertised as “the reserve cryptocurrency with all the third-party apps running on
TomoChain.”
233. TomoCoin promoted itself as being similar to bitcoin and ether. The whitepaper
asserted that, “[l]ike other cryptocurrencies such as Bitcoin and Ether, units of TomoCoin are
fractionally divisible, fungible and transferable to other TomoCoin holder.” In describing the
TomoChain “Reward Engine,” TomoChain asserted that the “process mimics Bitcoin block
rewards in that at a fixed interval, the Reward Engine will emit a predetermined amount of token
to ReplyBlock users based on their relative contributions to the application.”
234. The Terms of Sale for the TOMO asserted that TOMO were not securities:
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The Tomocoins are not and shall not be construed as any form of
digital currency (other than the Tomocoins themselves being the
native and dedicated currency for the Toma Platform and the Toma
network), shares or security, commodity or any kind of financial
instrument or product.
On this basis, and the others described below, investors reasonably understood that TOMO was
235. At the time of the TOMO ICO, TomoChain took advantage of the market’s lack
of understanding and awareness concerning how cryptocurrencies worked. In the face of
promises that TOMO “like other cryptocurrencies such as Bitcoin and Ether,” and considering
the new technology at issue, many individuals were understandably unaware that TOMO tokens
had fundamentally different features than other cryptocurrencies, including being more
centralized than Bitcoin or Ethereum. One of these primary differences is that all TOMO were
issued by TomoChain at creation at very little economic cost—and enormous potential upside—
to the TomoChain founders.
236. The creation of TOMO tokens thus occurred through a centralized process, in
users engage in mining and other efforts to build the ecosystem. Although the centralized
process by which TOMO tokens were created is relevant for determining that they are securities,
it was only after the passage of time and disclosure of additional information about the issuer’s
intent, process of management, and success, or lack thereof, in allowing decentralization in its
network to arise that a reasonable purchaser could know that he or she had acquired a security.
Purchasers were thereby misled into believing that TOMO was something other than a security,
when it was a security.
237. Investors purchased TOMO tokens with the reasonable expectation that they
would make a profit.

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238. TOMO token holders stood to share in potential profits from the successful launch
of the TOMO token. A reasonable investor would have been motivated, at least in part, by the
prospect of profits on their investment in the TOMO ecosystem.
TomoChain, its co-founders, and TomoChain’s development team. Investors in TOMO relied on
the managerial and entrepreneurial efforts of TomoChain and its executive and development
team to manage and develop the TomoChain software.
240. Investors in TOMO reasonably expected TomoChain and TomoChain’s
development team to provide significant managerial efforts after TOMO’s launch.
241. The expertise of TomoChain was critical in monitoring the operation of TOMO,
promoting TOMO, and deploying investor funds. Investors had little choice but to rely on their
expertise. The TOMO protocol and governance structure were predetermined before the ICO
was launched.
242. Accordingly, under the SEC’s Framework, the TOMO token was and is a
security.
H. The Class Has Suffered Significant Damages From Defendants’ Actions
243. As a direct result of Defendants’ issuance, promotion, and sale of unregistered
securities, Plaintiff and the Class—many of whom are retail investors who lack the technical and
financial sophistication necessary to have evaluated the risks associated with their investments in
the Tokens—have suffered significant damages in an amount to be proven at trial.
244. The Tokens today are worth far less than the price Plaintiff and the Class paid for
them.
245. To the extent Plaintiff still holds any Tokens, he hereby demands rescission and
makes any necessary tender of the Tokens.

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V. CLASS ALLEGATIONS
246. Plaintiff brings this action as a class action pursuant to Fed. R. Civ. P. 23 and seeks
certification of the following class (together, the “Class”): All persons who purchased any of the
following tokens on the KuCoin exchange: EOS, SNT, QSP, KNC, TRX, OMG, LEND, ELF,
CVC, and TOMO, between September 15, 2017, and the present. Accordingly, the Class Period
is September 15, 2017 through the present.
247. Excluded from the Class are Defendants, their officers and directors, and members
of their immediate families or their legal representatives, heirs, successors or assigns and any entity
in which Defendants have or had a controlling interest.
248. Plaintiff reserves the right to amend the Class definition if investigation or
discovery indicate that the definition should be narrowed, expanded, or otherwise modified.
249. The members of the Class are so numerous that joinder of all members is
impracticable. The precise number of Class members is unknown to Plaintiff at this time, but it is
believed to be in the tens of thousands.
250. Members of the Class are readily ascertainable and identifiable. Members of the
Class may be identified by publicly accessible blockchain ledger information and records
maintained by Defendants or its agents. They may be notified of the pendency of this action by
electronic mail using a form of notice customarily used in securities class actions.
251. Plaintiff’s claims are typical of the claims of the Class members as all Class
members are similarly affected by Defendants’ respective wrongful conduct in violation of the
laws complained of herein. Plaintiff does not have any interest that is in conflict with the interests
of the members of the Class.
252. Plaintiff and members of the Class sustained damages from Defendants’ common
course of unlawful conduct based upon the loss in market value of the Tokens.
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253. Plaintiff has fairly and adequately protected, and will continue to fairly and
adequately protect, the interests of the members of the Class and has retained counsel competent
and experienced in class actions and securities litigation. Plaintiff has no interests antagonistic to
or in conflict with those of the Class.
254. Plaintiff seeks declaratory relief for himself and the Class, asking the Court to
declare their purchase agreements with KuCoin void, such that prosecuting separate actions by or
against individual members of the Class would create a risk of inconsistent or varying
adjudications with respect to individual members of the Class that would establish incompatible
standards of conduct for KuCoin; and KuCoin has acted on grounds that apply generally to the
Class, so that the declaratory relief is appropriate respecting the class as a whole.
255. Common questions and answers of law and fact exist as to all members of the Class
and predominate over any questions solely affecting individual members of the Class, including
but not limited to the following:
• Whether the Tokens are securities under federal and state law;
• Whether KuCoin operated as an unregistered exchange;
• Whether KuCoin operated as an unregistered broker-dealer;
• Whether KuCoin offered or sold the Tokens to members of the Class;
• Whether the members of the Class suffered damages as a result of Defendants’
conduct in violation of federal and state law; and
• Whether the Class members are entitled to void their purchase agreements with
KuCoin and to recover the monies they paid thereunder.
256. A class action is superior to all other available methods for the fair and efficient
adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the
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damages suffered by some of the individual Class members may be relatively small, the expense
and burden of individual litigation makes it impossible for members of the Class to individually
redress the wrongs done to them.
257. There will be no difficulty in the management of this action as a class action.
FIRST CAUSE OF ACTION

Unregistered Offer and Sale of Securities
Sections 5 and 12(a)(1) of the Securities Act
(KuCoin)
258. Plaintiff realleges the allegations above.
259. Section 5(a) of the Securities Act states: “Unless a registration statement is in effect
as to a security, it shall be unlawful for any person, directly or indirectly (1) to make use of any
means or instruments of transportation or communication in interstate commerce or of the mails
to sell such security through the use or medium of any prospectus or otherwise; or (2) to carry or
cause to be carried through the mails or in interstate commerce, by any means or instruments of
transportation, any such security for the purpose of sale or for delivery after sale.” 15 U.S.C.
§ 77e(a).
260. Section 5(c) of the Securities Act states: “It shall be unlawful for any person,
directly or indirectly, to make use of any means or instruments of transportation or communication
in interstate commerce or of the mails to offer to sell or offer to buy through the use or medium of
any prospectus or otherwise any security, unless a registration statement has been filed as to such
security, or while the registration statement is the subject of a refusal order or stop order or (prior
to the effective date of the registration statement) any public proceeding or examination under
section 77h of this title.” Id. § 77e(c).
261. When issued, the Tokens were securities within the meaning of Section 2(a)(1) of
the Securities Act. Id. § 77b(a)(1). KuCoin promoted, solicited or sold purchases of the Tokens
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from Plaintiff and members of the Class. KuCoin thus directly or indirectly made use of means or
instruments of transportation or communication in interstate commerce or of the mails, to offer to
sell or to sell securities, or to carry or cause such securities to be carried through the mails or in
interstate commerce for the purpose of sale or for delivery after sale. No registration statements
have been filed with the SEC or have been in effect with respect to any of the offerings alleged
herein.
262. Section 12(a)(1) of the Securities Act provides in relevant part: “Any person who
offers or sells a security in violation of section 77e of this title . . . shall be liable, subject to
subsection (b), to the person purchasing such security from him, who may sue either at law or in
equity in any court of competent jurisdiction, to recover the consideration paid for such security
with interest thereon, less the amount of any income received thereon, upon the tender of such
security, or for damages if he no longer owns the security.” Id. § 77l(a)(1).
263. Accordingly, KuCoin has violated Sections 5(a), 5(c), and 12(a)(1) of the Securities
Act, id. §§ 77e(a), 77e(c), and 77l(a)(1).
264. Plaintiff and the Class seek rescissory damages with respect to purchases of Tokens
on KuCoin within the last three years and within one year from when an investor could adequately
plead that a Token is a security. Id. § 77m.
SECOND CAUSE OF ACTION

Contracts With an Unregistered Exchange
Sections 5 and 29(b) of the Exchange Act
(KuCoin)
266. In relevant part, section 5 of the Exchange Act makes it unlawful “for any . . .
exchange, directly or indirectly, to make use of . . . any means or instrumentality of interstate
commerce for the purpose of using any facility of an exchange within or subject to the jurisdiction
66
of the United States to effect any transaction in a security . . . unless such exchange (1) is registered
as national securities exchange under section 78f of this title, or (2) is exempted from such
registration.” 15 U.S.C. § 78e. An “exchange” is any entity that “constitutes, maintains, or
provides a marketplace or facilities for bringing together purchasers and sellers of securities.” 17
C.F.R. § 240.3b-16.
267. KuCoin has made use of means and instrumentalities of interstate commerce for
the purpose of using a facility of an exchange within and subject to the jurisdiction of the United
States throughout the Class Period, including because KuCoin has operated as an exchange
throughout the Class Period through the utilization of the Internet within, and multiple servers
throughout, the United States.
268. KuCoin has thus made use of such means and instrumentality without being
registered as national securities exchange under section 78f and without any exemption from such
registration requirement.
269. In the course of planning to operate and as operating as an unregistered exchange
within the United States, KuCoin has entered into contracts with issuers of digital tokens whereby
the parties to those contracts agreed that, operating as an unregistered exchange within the United
States, KuCoin would make available for sale the issuers’ digital tokens. The parties to these
contracts thus reached an agreement whereby and pursuant to which KuCoin would operate in
violation of section 5 of the Exchange Act.
270. In the course of operating as an unregistered exchange within and subject to the
jurisdiction of the United States, in the performance of its contracts with the issuers of digital
tokens, which is a contract for listing a security on an exchange, and pursuant to and consistent
with its Terms of Use, KuCoin has entered into contracts with the members of the Class pursuant
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to which the members purchased digital tokens through KuCoin and paid KuCoin fees for the use
of its exchange. The parties to these contracts thus reached an agreement whereby and pursuant
to which KuCoin was operating in violation of section 5 of the Exchange Act, and whereby and
pursuant to which these parties were continuing a practice in violation of section 5 of the Exchange
Act.
271. The foregoing contracts were made in violation of section 5 of the Exchange Act,
and their performance involves the violation of section 5, and the continuation of a practice in
violation of section 5, because KuCoin entered into them for the purpose of operating, and as
operating, as an unlicensed exchange in violation of section 5; and because the parties to the
contracts reached agreements whereby and pursuant to which KuCoin would be and was operating
in violation of section 5.
272. Section 29(b) of the Exchange Act provides in relevant part that “[e]very contract
made in violation of any provision of this chapter . . . and every contract (including any contract
for listing a security on an exchange) . . . the performance of which involves the violations of, or
the continuance of any relationship or practice in violation of, any provision of this chapter . . .
shall be void . . . as regards the rights of any person who, in violation of any such provision, . . .
shall have made or engaged in the performance of such contract.” 15 U.S.C. § 78cc.
273. Section 29(b) affords Plaintiff and the Class the right, which they hereby pursue, to
void their purchase agreements with KuCoin and to recover, as rescissory damages, the fees they
have paid under those contracts.
274. Plaintiff and the Class seek to void contracts and recover damages with respect to
purchases of Tokens on KuCoin within the last three years and within one year from when an
investor could adequately plead that a Token is a security. Id. § 78cc(b).
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THIRD CAUSE OF ACTION

Unregistered Broker and Dealer
Sections 15(a)(1) and 29(b) of the Exchange Act
(KuCoin)
276. In relevant part, with respect to a broker or dealer who is engaged in interstate
commerce in using the facility of an exchange, section 15(a)(1) of the Exchange Act makes it
unlawful “for any broker or dealer . . . to make use of . . . any means or instrumentality of interstate
commerce to effect any transactions in, or to induce or attempt to induce the purchase or sale of,
any security . . . unless such broker or dealer is registered in accordance with subsection (b) of this
section.” 15 U.S.C. § 78o(a)(1).
277. As a broker-dealer engaged in interstate commerce using the facility of an
exchange, and without being registered in accordance with subsection (b) of section 15 of the
Exchange Act, throughout the Class Period, KuCoin has made use of means and instrumentalities
of interstate commerce to effect transactions in, and to induce or attempt to induce the purchase or
sale of, securities.
278. A “broker” includes an entity “engaged in the business of effecting transactions in
securities for the account of others.” Id. § 78(a)(4)(A). In addition, an entity is a broker if it assists
issuers with structuring a securities offering, identifies potential purchasers, or advertises a
securities offering. KuCoin has operated as a broker during the Class Period by facilitating the
sale of digital assets as part of other entities’ ICOs, including by marketing the digital assets,
accepting investors’ orders, accepting payment for orders, and working with issuers to transfer
digital assets to investors after payment.
279. A “dealer” includes an entity “engaged in the business of buying and selling
securities . . . for such person’s own account,” insofar as such transactions are part of that person’s
69
“regular business.” KuCoin has operated as a dealer during the Class Period by holding itself out
as willing to buy or sell securities on a continuous basis and as willing to provide liquidity to the
market for digital assets, by having regular customers, by having a regular turnover inventory of
securities, by purchasing digital assets for accounts in KuCoin’s name (often at a discount to the
ICO price), and by then selling the digital assets to investors for profit immediately or at a later
time after being held in inventory.
280. In the course of planning to operate and as operating as an unregistered
broker-dealer, KuCoin has entered into contracts with issuers of digital tokens whereby the parties
to those contracts agreed that, operating as an unregistered broker-dealer within the United States,
KuCoin would make available for sale the issuers’ digital tokens. The parties to these contracts
thus reached an agreement whereby and pursuant to which KuCoin would operate in violation of
section 15(a)(1) of the Exchange Act.
281. In the course of operating as an unregistered broker-dealer, in the performance of
its contracts with the issuers of digital tokens, and pursuant to and consistent with its Terms of
Use, KuCoin has entered into contracts with the members of the Class pursuant to which the
members purchased digital tokens through KuCoin and paid KuCoin fees for the use of its
exchange. The parties to these contracts thus reached an agreement whereby and pursuant to which
KuCoin was operating in violation of section 15(a)(1) of the Exchange Act.
282. The foregoing contracts were made in violation of section 5 of the Exchange Act,
and their performance involves the violation of section 5, and the continuation of a practice in
violation of section 5, because KuCoin entered into them for the purpose of operating, and as
operating, as an unlicensed exchange in violation of section 5; and because the parties to the
70
contracts reached agreements whereby and pursuant to which KuCoin would be and was operating
in violation of section 5.
283. Section 29(b) of the Exchange Act provides in relevant part that “[e]very contract
made in violation of any provision of this chapter . . . and every contract (including any contract
for listing a security on an exchange) . . . the performance of which involves the violations of, or
the continuance of any relationship or practice in violation of, any provision of this chapter . . .
shall be void . . . as regards the rights of any person who, in violation of any such provision, . . .
shall have made or engaged in the performance of such contract.” Id. § 78cc.
284. Section 29(b) affords Plaintiff and the Class the right, which they hereby pursue, to
void their purchase agreements with KuCoin and to recover, as rescissory damages, the fees they
have paid under those contracts.
285. Plaintiff and the Class seek to void contracts and recover damages with respect to
purchases of Tokens on KuCoin within the last three years and within one year from when an
investor could adequately plead that a Token is a security. Id. § 78cc(b).
FOURTH CAUSE OF ACTION

Control Person Liability for Violations of
Section 20 of the Exchange Act
(Michael Gan, Johnny Lyu, and Eric Don)
287. This Count is asserted against the Individual Defendants for violations of Section
20 of the Exchange Act, 15 U.S.C. § 78t(a).
288. Each of the Individual Defendants, by virtue of their offices, stock ownership,
agency, agreements or understandings, and specific acts, at the time of the wrongs alleged herein,
and as set forth herein, had the power and authority to direct the management and activities of
KuCoin and its employees, and to cause KuCoin to engage in the wrongful conduct complained
71
of herein. Each Individual Defendant had and exercised the power and influence to cause the
unlawful sales of securities on an unregistered exchange as described herein.
289. The Individual Defendants have the power to direct or cause the direction of the
management and policies of KuCoin.
290. The Individual Defendants, separately or together, have sufficient influence to have
either caused KuCoin to register as an exchange or prevented KuCoin from effecting transactions
of securities as an unregistered exchange.
291. The Individual Defendants, separately or together, jointly participated in, and/or
aided and abetted, KuCoin’s failure to register as an exchange and KuCoin’s offer of securities on
an unregistered exchange.
292. By virtue of the conduct alleged herein, the Individual Defendants are liable for the
wrongful conduct complained of herein and are liable to Plaintiff and the Class for rescission
and/or damages suffered.
FIFTH CAUSE OF ACTION

Control Person Liability for Violations of
Sections 5 and 12(a)(1) of the Securities Act
294. This Count is asserted against KuCoin and the Individual Defendants for violations
of Section 15 of the Securities Act, 15 U.S.C. § 77o.
agency, agreements or understandings, and specific acts, at the time of the wrongs alleged herein,
and as set forth herein, had the power and authority to direct the management and activities of
KuCoin and its employees, and to cause KuCoin to engage in the wrongful conduct complained
72
of herein. Each Individual Defendant had and exercised the power and influence to cause the
unlawful solicitation of various ERC-20 tokens as described herein.
296. The Individual Defendants have the power to direct or cause the direction of the
management and policies of KuCoin.
297. The Individual Defendants, separately or together, have sufficient influence to have
caused KuCoin to solicit transactions of securities.
298. The Individual Defendants, separately or together, jointly participated in, and/or
aided and abetted, KuCoin’s solicitation of securities.
299. By virtue of the conduct alleged herein, the Individual Defendants are liable for the
wrongful conduct complained of herein and are liable to Plaintiff and the Class for rescission
and/or damages suffered.
SIXTH CAUSE OF ACTION

Unregistered Offer and Sale of Securities
Tex. Rev. Civ. Stat. art. 581-33
(KuCoin)
301. The Texas Securities Act forbids the offer or sale of unregistered securities. Tex.
Rev. Civ. Stat. art. 581-7(A)(1). Any person who unlawfully offers or sells an unregistered
security “is liable to the person buying the security from him, who may sue either at law or in
equity for rescission or for damages if the buyer no longer owns the security.” Id. art.
581-33(A)(1).
302. When issued, the Tokens were securities within the meaning of Tex. Rev. Civ. Stat.
art. 581-4(A). KuCoin sold or solicited purchases of the Tokens to Plaintiff and members of the
Class. The Tokens were neither registered as required under the Texas Securities Act nor subject
to any exemption from registration.
73
303. The Tokens were offered or sold in the State of Texas, including without limitation
through solicitations directed by KuCoin to Texas and received in Texas.
304. Accordingly, KuCoin has violated the Texas Securities Act through KuCoin’s sale
of unregistered securities.
305. Neither Plaintiff nor any Class members have received a rescission offer to refund
the consideration paid for the Tokens that also meets the requirements of Tex. Rev. Civ. Stat. Ann.
art. 581-33(I).
306. Plaintiff and Class members who own Tokens hereby make any necessary tender
and seek the consideration paid for any Tokens purchased on KuCoin in the last three years plus
interest thereon at the legal rate from the date of payment, less the amount of any income received
on the Tokens, costs, and reasonable attorneys’ fees if the Court finds that the recovery would be
equitable in the circumstances; together with all other remedies available to them.
307. Plaintiff and Class members who no longer own Tokens seek damages for
purchases of Tokens on KuCoin within the last three years, in the amount of the consideration the
buyer paid for the Tokens plus interest thereon at the legal rate from the date of payment by the
buyer, less the greater of: (i) the value of the Tokens at the time the buyer disposed of them plus
the amount of any income the buyer received on the Tokens; or (ii) the actual consideration
received for the Tokens at the time the buyer disposed of them plus the amount of any income the
buyer received on the Tokens; together with costs, reasonable attorneys’ fees if the Court finds
that the recovery would be equitable in the circumstances, and all other remedies available to them.
74
SEVENTH CAUSE OF ACTION

Control Person Liability for Unregistered Offer and Sale of Securities
Tex. Rev. Civ. Stat. art. 581-33
309. Every person who directly or indirectly controls a seller liable under the Texas
Securities Act for unlawfully selling unregistered securities is jointly and severally liable with and
to the same extent as the seller, unless the controlling person “sustains the burden of proof that he
did not know, and in the exercise of reasonable care could not have known, of the existence of the
facts by reason of which the liability is alleged to exist.” Tex. Rev. Civ. Stat. art. 581-33(F).
310. When issued, the Tokens were securities within the meaning of Tex. Rev. Civ. Stat.
art. 581-4(A). KuCoin sold or solicited purchases of the Tokens to Plaintiff and members of the
Class. The Tokens were neither registered as required under the Texas Securities Act nor subject
to any exemption from registration.
311. The Tokens were offered or sold in the State of Texas, including without limitation
through solicitations directed by KuCoin to Texas and received in Texas.
agency, agreements or understandings, and specific acts had, at the time of the wrongs alleged
herein, and as set forth herein, the power and authority to directly or indirectly control the
management and activities of KuCoin and its employees, and to cause KuCoin to engage in the
wrongful conduct complained of herein. Each Individual Defendant had and exercised the power
and influence to cause the unlawful sales of unregistered securities as described herein.
313. Accordingly, the Individual Defendants, as persons who indirectly or directly
controlled KuCoin, have violated the Texas Securities Act through KuCoin’s sale of unregistered
securities.
75
314. Neither Plaintiff nor any Class members have received a rescission offer to refund
the consideration paid for the Tokens that also meets the requirements of Tex. Rev. Civ. Stat. Ann.
art. 581-33(I).
315. Plaintiff and Class members who own Tokens hereby make any necessary tender
and seek the consideration paid for any Tokens purchased on KuCoin in the last three years plus
interest thereon at the legal rate from the date of payment, less the amount of any income received
on the Tokens, costs, and reasonable attorneys’ fees if the Court finds that the recovery would be
equitable in the circumstances; together with all other remedies available to them.
316. Plaintiff and Class members who no longer own Tokens seek damages for
purchases of Tokens on KuCoin within the last three years, in the amount of the consideration the
buyer paid for the Tokens plus interest thereon at the legal rate from the date of payment by the
buyer, less the greater of: (i) the value of the Tokens at the time the buyer disposed of them plus
the amount of any income the buyer received on the Tokens; or (ii) the actual consideration
received for the Tokens at the time the buyer disposed of them plus the amount of any income the
buyer received on the Tokens; together with costs, reasonable attorneys’ fees if the Court finds
that the recovery would be equitable in the circumstances, and all other remedies available to them.
76
PRAYER FOR RELIEF
317. On behalf of himself and the Class, Plaintiff requests relief as follows:
(a) That the Court determines that this action may be maintained as a class action,
that Plaintiff be named as Class Representative of the Class, that the
undersigned be named as Lead Class Counsel of the Class, and directs that
notice of this action be given to Class members;
(b) That the Court enter an order declaring that Defendants’ actions, as set forth in
this Complaint, violate the federal and state laws set forth above;
(c) That the Court award Plaintiff and the Class damages in an amount to be
determined at trial;
(d) That the Court issue appropriate equitable and any other relief against
Defendants to which Plaintiff and the Class are entitled, including a declaration
that the purchase agreements between each members of the Class and KuCoin
are void;
(e) That the Court award Plaintiff and the Class pre- and post-judgment interest
(including pursuant to statutory rates of interest set under state law);
(f) That the Court award Plaintiff and the Class their reasonable attorneys’ fees and
costs of suit; and
(g) That the Court award any and all other such relief as the Court may deem just
and proper under the circumstances.
77
JURY TRIAL
318. Pursuant to Federal Rule of Civil Procedure 38(b), Plaintiff respectfully demands a
trial by jury for all claims.
Dated: April 3, 2020

New York, New York
Respectfully submitted,
/s/ Philippe Z. Selendy /s/ Kyle W. Roche

Philippe Z. Selendy Kyle W. Roche
Jordan A. Goldstein Edward Normand
Oscar Shine Velvel (Devin) Freedman (pro hac pending)
David Coon Jordana Haviv
SELENDY & GAY, PLLC ROCHE CYRULNIK
1290 Sixth Avenue, 17th Floor FREEDMAN LLP
New York, NY 10104 99 Park Avenue, 19th Floor
pselendy@selendygay.com New York, NY 10016
jgoldstein@selendygay.com kyle@rcfllp.com
oshine@selendygay.com tnormand@rcfllp.com
dcoon@selendygay.com vel@rcfllp.com
jhaviv@rcfllp.com
78
CERTIFICATION OF
SECURITIES CLASS ACTION COMPLAINT
I, Chase Williams, hereby certify that the following is true and correct to the best of my
knowledge, information, and belief:
1. I have reviewed the complaint filed herein (the “Complaint”), and have authorized the
filing of a similar complaint and a lead plaintiff motion on my behalf.
2. I did not purchase the securities at issue in the Complaint at the direction of my counsel
or in order to participate in any private action arising under the Securities Act of 1933 (the “Securities
Act”) or the Securities Exchange Act of 1934 (the “Exchange Act”).
3. I am willing to serve as a representative party on behalf of the class (the “Class”) as
defined in the Complaint, including providing testimony at deposition and trial, if necessary.
4. During the Class Period (as defined in the Complaint), I purchased and/or sold the
unregistered securities on Kucoin: Tomochain (“TOMO”).
5. During the three-year period preceding the date of this Certification, I have not sought to
serve as a representative party on behalf of a class in any private action arising under the Securities Act or
the Exchange Act.
6. I will not accept any payment for serving as a representative party on behalf of the Class
beyond my pro rata share of any possible recovery, except for an award, as ordered by the court, for
reasonable costs and expenses (including lost wages) directly relating to my representation of the Class.
7. I understand that executing this Certification is not a prerequisite to participation in this
Class Action as members of the Class.
_______________________
Chase Williams
Houston, Texas

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Case 1:20-cv-02806 Document 1 Filed 04/03/20 Page 1 of 79

UNITED STATES DISTRICT COURT

CHASE WILLIAMS, individually and on behalf of

CLASS ACTION COMPLAINT

(together, the “Tokens”).

2. A digital token is a type of digital asset that exists on a “blockchain,” which is

on blockchains, including cryptocurrencies, such as Bitcoin and Ethereum (both discussed in

conditions are met.

the token can be used.

As a result, KuCoin and the Issuers reaped billions of dollars in profits.

5. The scheme worked as follows: working to capitalize on the enthusiasm for

it is worth only $2.22.

incentives concerning management; warnings about relying on forward-looking statements; an

made or the risks of their investments.

tokens are securities under federal and state securities laws.

9. On April 3, 2019, in a “Framework for ‘Investment Contract’ Analysis of Digital

equal force to the other Tokens.

10. KuCoin and the Issuers wrongfully engaged in millions of transactions—including

securities laws require.

to KuCoin on such purchases.

thereon, attorneys’ fees, and costs.

during the Class Period.

digital assets on its exchange.

information and belief, Gan resides in Singapore.

16. In March 2020, simultaneous with the announcement of KuGroup, Defendant

III. JURISDICTION AND VENUE

the Securities Act, 15 U.S.C. § 77v.

IV. FACTUAL ALLEGATIONS

A. The First Cryptocurrency: Bitcoin

23. A cryptocurrency is a digital asset designed to work as a medium of exchange or a

store of value or both. Cryptocurrencies leverage a variety of cryptographic principles to secure

in existence. This ledger is called the blockchain.

27. Accordingly, blockchains are generally designed as a framework of incentives that

newly minted bitcoin. This process is colloquially referred to as “mining.”

second way to acquire cryptocurrencies is to acquire them through an online “cryptocurrency

convenient marketplace to match buyers and sellers of virtual currencies.

29. In April 2013, there were only seven cryptocurrencies listed on

the site monitors more than 2,000 cryptocurrencies.

million and $3.8 billion.

31. Ethereum is the second-most popular cryptocurrency, with a market capitalization

performance of a contract. Smart contracts can be self-executing and self-enforcing, which

theoretically reduces the transaction costs associated with traditional contracting.

worth more than it was at the beginning of the month.

specified conditions are met.

Ethereum Request for Comments (“ERCs”).

launch and create new digital tokens.

on the Ethereum blockchain. These tokens are known as “ERC-20 tokens.”

Bitcoin and Ethereum because they do not operate on an independent blockchain.

D. The Advent Of The “ICO”

bitcoin’s price increased from approximately $1,000 to approximately $20,000. Ethereum’s

approximately 17,000 percent over that period.

43. Seeking to capitalize on the growing enthusiasm for cryptocurrencies, many

social media sites that published active and upcoming ICOs.

information and incentives concerning management; warnings about relying on forward-looking

format that investors could readily follow.

48. As a result of the lack of information, trading of tokens on exchanges such as

risk disclosure to investors, including members of the Class.

E. KuCoin Solicited And Sold ERC-20 Tokens