Anyone who lost money on FLOW tokens purchased on a U.S.-based exchange.
What’s Going On?
Attorneys working with ClassAction.org have reason to believe that the Flow blockchain’s native token may have been illegally sold as an unregistered security, leaving buyers without certain protections under federal securities laws. The attorneys are now looking to file a class action lawsuit on behalf of those who lost money on FLOW.
How Could a Lawsuit Help?
A class action lawsuit could help FLOW token buyers get back money they lost as a result of purchasing potentially unregistered securities. It could also possibly force FLOW issuer Dapper Labs to comply with federal securities laws.
Attorneys working with ClassAction.org want to hear from anyone who purchased FLOW tokens on a U.S.-based crypto exchange and experienced a financial loss (either realized or unrealized).
On June 6, 2023, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Coinbase that accused the crypto trading platform of illegally operating an unregistered securities exchange. The lawsuit named 13 crypto assets, including the Flow blockchain’s native token FLOW, as examples of securities that the SEC claimed were being illegally sold on the exchange.
In the wake of the lawsuit’s filing, FLOW reportedly experienced a significant price drop that brought the coin’s value to an all-time low by June 10.
Now, attorneys working with ClassAction.org are looking into whether a lawsuit can be filed against FLOW issuer Dapper Labs alleging that the token’s availability on crypto exchanges was illegal and financially harmed investors. As part of their investigation, the attorneys need to hear from more people who may have been affected.
SEC Lawsuit Claims FLOW Tokens Are Securities
The SEC’s lawsuit claims Coinbase has violated federal securities laws by operating as a broker, national securities exchange and clearing agency without properly registering with the commission. In support of its argument, the SEC listed 13 coins – with trading symbols SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO – as examples of crypto assets available on the platform that allegedly qualify as a type of security known as an investment contract.
Under the Supreme Court’s Howey test, an investment contract exists when “there is an investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”
The SEC argued that FLOW qualifies as an investment contract given Dapper Labs and the Flow blockchain’s development team led consumers to reasonably view the coin as an investment that would turn a profit. Per the case, since FLOW tokens are required to interact with the blockchain, these profits depend on the efforts of Dapper Labs and the Flow development team to continue building and promoting the blockchain network. As more people become interested in the Flow blockchain, which has been touted as a faster, more efficient network for developers, demand for its native token will increase and investors will profit from the increased value, according to the suit.
If FLOW was illegally sold as an unregistered security, investors may have been deprived of certain protections under federal securities laws, including disclosure requirements meant to provide consumers with complete and non-misleading information about an investment and its risks. The SEC claimed in its lawsuit against Coinbase that the exchange exposed investors to “significant risk” by failing to register with the agency and comply with these disclosure rules.
Other Lawsuits Claim Investors Were Harmed by Crypto Tokens Sold as Securities
Several other crypto tokens have been the subject of class action lawsuits that alleged they were misrepresented as investments and illegally sold as unregistered securities. These include Ripple Labs’ XRP token, Terraform Labs’ terraUSA and Luna coins, and Voyager’s VGX token, which was also named in the SEC’s Coinbase lawsuit.
The lawsuits alleged that each crypto asset was represented as a sound investment from which consumers could expect to make a profit – yet the tokens were allegedly never registered with the SEC as securities. Per the suits, the coins each saw dramatic price drops that caused investors to sustain stunning losses without having been apprised of each investment’s risks.
According to the lawsuit against Voyager, “[i]t is situations exactly like this that federal and state securities laws were enacted to prevent.”
How a Class Action Lawsuit Could Help
A successful class action lawsuit could potentially compensate people who bought FLOW tokens and sustained losses. It could also force Dapper Labs to comply with federal securities laws in the future.