California Court Dismisses Crypto Lawsuit Against DFINITY Over Jurisdictional Issues

News | May 15, 2024 By:

On Tuesday, April 30, 2024, the United States District Court for the Northern District of California dismissed a lawsuit brought against Swiss cryptocurrency startup DFINITY Stiftung and its founders.

Eftychios Theodorakis had filed a lawsuit against DFINITY, its founder Dominic Williams, and board member Gian Bochsler, alleging that they made false statements about the company’s ICP cryptocurrency tokens and sold millions worth before the value dropped. Theodorakis claimed he was deceived into holding on to tokens that lost value.

The lawsuit contained claims of conversion, trespass to chattels, negligence, penalties under California law, unfair competition practices, intentional misrepresentation, and civil Racketeer Influenced and Corrupt Organizations (RICO) Act violations.

However, Judge Araceli Martínez-Olguín ruled that the court did not have personal jurisdiction over Williams and Bochsler as individuals. While the two had sold ICP tokens through the cryptocurrency exchange Coinbase, which is based in California, the judge found this was not enough to establish they had purposefully availed themselves of operating in the state.

Without jurisdiction over the RICO claims only alleged against Williams and Bochsler, Judge Martínez-Olguín then determined the court could not exercise supplemental jurisdiction over the remaining state law claims against DFINITY as a company. All claims were subsequently dismissed.

DFINITY is a Swiss nonprofit foundation that developed the Internet Computer blockchain-based decentralized computing network. They launched their native ICP token for the platform in May 2021.

Theodorakis, a Greek citizen, had received ICP tokens from his former employer DFINITY USA Research as part of his compensation. He claimed DFINITY and its executives misled the public about their ability to sell tokens after launch and dumped millions worth before the price fell.

While the lawsuit alleged millions in trading volumes through Coinbase, which has its legal headquarters in California, the judge found this was insufficient contact with the state to establish specific personal jurisdiction for the case. Simply using the services of a California-based company did not qualify as purposefully directing conduct there under the law.

Leave to amend was granted to try adding new jurisdictional allegations, though the judge noted it seemed unlikely any could overcome the jurisdictional barriers. If jurisdiction over the executives could be established, the state law claims against DFINITY as an entity may have proceeded as part of supplemental jurisdiction to the federal RICO allegations.

Without jurisdiction over vital claims, the entire case was dismissed. It remains to be seen if Theodorakis will attempt to refile an amended complaint addressing the court’s concerns or pursue the matter elsewhere.

Please contact BlockTribune for access to a copy of this filing.