Court Denies Former CEO’s Attempt to File Counterclaims in Cryptocurrency Startup Lawsuit
On Saturday, March 30, 2024, the United States District Court for the Northern District of California denied a motion for leave to file counterclaims in the lawsuit between TrustLabs, Inc. and its former CEO Daniel Jaiyong An.
TrustLabs is a San Francisco-based cryptocurrency company that was co-founded by Jaiyong in 2015. One of TrustLabs’ first products was TrueUSD, a stablecoin cryptocurrency pegged to the U.S. dollar. In late 2017 and 2018, Jaiyong and Rafael Cosman, TrustLabs’ other co-founders, offered investors Simple Agreements for Future Tokens (SAFTs), which were intended to help fund the development of the TrustToken blockchain platform and ecosystem. The SAFTs would entitle investors to receive TRU tokens upon the launch of the platform.
However, tensions arose between Jaiyong and other executives in early 2020 over disagreements about company strategy and transparency. In June 2020, Cosman and COO Alex de Lorraine asked Jaiyong to resign as CEO. When he did not, the board removed him from his position on July 7, 2020. TrustLabs alleges Jaiyong deleted the company’s Slack messaging system in retaliation before his access was revoked.
In April 2021, TrustLabs sued Jaiyong under computer hacking laws, claiming he intentionally deleted the Slack system and later tried accessing other company systems. Jaiyong denied the allegations. Over the next two years, discovery progressed in the case.
On July 17, 2023, Jaiyong filed a motion seeking leave to file nine counterclaims against TrustLabs and add Cosman, de Lorraine, and former board chair Tom Shields as defendants. The proposed counterclaims alleged breach of contract, wrongful termination, securities law violations, and other claims relating to his removal as CEO.
However, in its March 30th order, the District Court denied Jaiyong’s motion. The Court found his claims were largely known to Jaiyong since TrustLabs filed suit in April 2021 but were not raised until over two years later. Allowing the counterclaims now would cause undue prejudice to TrustLabs by expanding the scope of the litigation, requiring substantial new discovery, and delaying resolution. As fact discovery was also set to close soon, reopening the case for additional discovery could prolong proceedings.
The Court thus denied the motion, finding the unjustified delay and prejudice to TrustLabs warranted disallowing the belated counterclaims. The lawsuit will now proceed based on TrustLabs’ original computer hacking allegations against its former executive Jaiyong.
Please contact BlockTribune for access to a copy of this filing.
