2024 Crypto Securities Class Action Litigation: Trends and Analysis
The strength of the cryptocurrency markets throughout 2024 resulted in a notable decrease in crypto securities class action litigation compared to recent years. Despite this decline in the number of cases, the types of allegations made by plaintiffs in 2024 largely mirror those seen in prior years. This report examines the key trends in 2024 crypto securities class action litigation, focusing on the reduced number of filed cases, their geographical distribution, the current litigation stages, the involved defendants and allegations, and the impact of asset price fluctuations.
Fewer Cases Filed in 2024 Correlate with Stronger Crypto Markets
A significant shift occurred in 2024, with only eight crypto-related securities class action lawsuits filed. This is a substantial decrease compared to 2023 (14 cases), 2022 (23 cases), 2021 (12 cases), and 2020 (13 cases). This reduction likely correlates with the strong recovery and resilience observed in the crypto asset markets during 2024. Historical trends indicate fewer lawsuits are filed during periods of crypto market growth, when investors are generally experiencing profits, while more lawsuits tend to arise during “crypto winter,” a period characterized by declining crypto asset prices.
Geographical Distribution and Litigation Stages
Given the relatively limited number of crypto securities class action cases in 2024, their geographical spread has not been as extensive as in previous years. The cases filed in 2024 are distributed across New York, California, New Jersey, and Pennsylvania: two in the Southern District of New York, two in the Eastern District of New York, one in the Northern District of California, one in the Central District of California, one in the District of New Jersey, and one in the Eastern District of Pennsylvania. Notably, New York and California remain the most favored jurisdictions, possibly reflecting a strong crypto business presence and/or past case recoveries in these states.
As in prior years, most defendants in 2024 crypto class actions were headquartered or located in the U.S. In 2021, 8 of 12 defendants were U.S.-based; in 2022, 21 of 23 were U.S.-based; and in 2023, 9 of 14 were U.S.-based. In 2024, half of the central defendants were headquartered in the U.S., including Future FinTech Group Inc., Hut 8 Corp., Dolce & Gabbana USA Inc., and Midnight Hub. Additionally, one case involves celebrity defendant Caitlyn Jenner, who resides in the U.S. Exceptions to U.S. headquarters or individual locations include Iris Energy Limited (Australia), overHere Limited (Hong Kong), and Coinbase Global, Inc., which is remote-first but has a U.S.-based CEO, Brian Armstrong.
All eight cases initiated in 2024 remained unresolved and in their early stages of litigation. It is likely these cases will continue into 2025 and beyond. The impact of the U.S. Securities and Exchange Commission’s (SEC) reported decision to withdraw its ongoing litigation against Coinbase on the class action against the company, or on other crypto-related litigation, remains uncertain.
Types of Crypto Allegations and Defendants
Crypto securities class actions in 2024 targeted a diverse range of defendants, including crypto miners, a financial services company also involved in crypto mining and market data, a crypto asset trading platform, a Web3 streaming platform (which also created and sold NFTs), an NFT issuer from the fashion industry, a Web3 launchpad platform (used for a meme coin), and an international celebrity alleged to have promoted a meme coin. Notably, three of the eight 2024 cases involved defendants linked to crypto-related platforms, and two related to NFTs. This aligns with recent years where crypto exchanges/platforms and NFT-related companies were frequently targeted.
Common issues raised in the 2024 complaints include alleged violations of Section 10(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder (anti-fraud provisions), and Section 20(a) of the Exchange Act (regarding liability of “control persons”). Another common allegation, particularly in the meme coin/NFT context, was the purported unregistered offer and sale of securities in violation of Sections 5 and 12(a)(1) of the Securities Act of 1933 (the “Securities Act).
Hut 8 Corp. Securities Litigation
The Hut 8 Corp. Securities Litigation involves a case against Hut 8 Corp., a crypto asset and data mining company formed in November 2023 through a merger. The amended complaint alleges that the defendants made false and/or misleading statements concerning USBTC’s financial condition and cash flows and failed to disclose that USBTC was near bankruptcy and that USBTC’s King Mountain joint venture involved a mining site that “has historically failed to provide energy and high speed-internet.” The plaintiff claims a short seller report revealed the “truth.”
Iris Energy Limited Securities Litigation
In the Iris Energy Limited Securities Litigation, another case against a crypto mining company, plaintiffs allege that a short seller report revealed the “truth.” Specifically, the plaintiffs allege the defendants overstated Iris Energy’s prospects. The plaintiffs also claimed the defendants’ statements about its business were false and misleading and/or lacked a reasonable basis at all relevant times.
Future FinTech Group Inc. Securities Litigation
The Future FinTech Group Inc. Securities Litigation is the sole 2024 crypto securities class action filed against a financial services company. The plaintiff alleges the defendants violated the Exchange Act and made false or misleading statements. These included claims that the CEO manipulated the stock price and the company understated regulatory risks due to the CEO’s actions. The plaintiff asserts the “truth” emerged on January 11, 2024, after the SEC filed a complaint against the Company’s CEO.
Coinbase Global, Inc. Securities Litigation
The Coinbase Global, Inc. Securities Litigation, involving a crypto asset exchange/trading platform, demonstrates the international nature of the crypto industry. The plaintiff alleges violations of Section 10(b) of the Exchange Act, claiming the defendants made false or misleading statements. These include that Coinbase’s British unit failed to prevent criminals from using its platform and that undisclosed regulatory risks resulted. Coinbase’s stock allegedly fell after the FCA announced a fine against the British unit.
Dolce & Gabbana USA Inc. NFTs Securities Litigation
This is one of two NFT-related securities class actions. In 2022, Dolce & Gabbana entered a joint venture with NFT marketplace UNXD Inc. to create and market the DGFamily project. The plaintiff claims that the “public offer and sale of DGFamily Products was an unlawful offering of unregistered securities" and seeks damages under state law and the Exchange Act or the Commodity Exchange Act. The plaintiff also alleges delayed delivery of NFTs and a failure to provide the benefits advertised.
Midnight Hub Securities Litigation
In the second 2024 case involving NFTs, defendants created and sold two NFTs to promote the Midnight Hub Web3 ecosystem. The plaintiff alleges the offer and sale of these NFTs were unregistered offers and sales of securities.
Meme Coin Cases: $HAWK and $JENNER
The final two cases involve meme coins. The first concerns the $HAWK meme coin connected to celebrity Haliey Welch, while the second involves the $JENNER meme coin connected to Caitlyn Jenner. Both cases allege the unlawful offer and sale of meme coins without proper registration. Defendants promoted the meme coins on X (formerly Twitter). Meme coins are often accompanied by price fluctuations, making them attractive to unsophisticated investors.
Conclusion
The 2024 trends show a decline in crypto securities class action filings, likely influenced by stronger market conditions. However, the types of allegations and defendants targeted remain similar to prior years. If the crypto bull market were to end in 2025, there could be more crypto securities class actions filed against companies or celebrities related to meme coins that lose value.
