David Chen Accused of Stealing Crypto Trading Code in Lawsuit Filed by OtterSec
On Monday, November 25, 2024, Robert Chen and OtterSec LLC filed an amended complaint in the US District Court for the District of Wyoming against David Chen, alleging severe misconduct and theft related to their cryptocurrency trading business.
The case highlights the deterioration of a partnership between two co-founders of OtterSec, a tech company established in Wyoming. According to the complaint, Robert Chen and David Chen, who are not related, initially formed OtterSec in February 2022 with the aim of conducting security audits for cryptocurrency platforms and developing trading strategies.
The plaintiffs assert that after a promising start, the relationship soured when David Chen allegedly stopped contributing to the company and engaged in unlawful activities that significantly harmed OtterSec. The complaint states that David Chen stole critical company assets, including proprietary computer code that was integral to OtterSec’s operations in the cryptocurrency trading sector. The plaintiffs claim this theft was valued at hundreds of thousands of dollars.
The amended complaint details that after transferring the rights to the Preexisting Solend Liquidator Code to OtterSec, David Chen was granted permission to develop a new version of the code. This version, referred to as the OtterSec Solend Liquidator Code, was created with significant investment from OtterSec in terms of time and resources. However, the plaintiffs allege that David Chen later misappropriated the OtterSec Codes and used them for his personal gain.
Robert Chen contends that following the theft, David Chen made approximately $500,000 within weeks by exploiting the stolen OtterSec Codes, depriving the company of potential revenue. The plaintiffs also cite that David’s actions led to the collapse of a nearly finalized investment deal with a venture capital firm that was poised to inject $1 million into OtterSec.
The complaint outlines several claims against David Chen, including conversion, breach of fiduciary duty, and misappropriation of trade secrets under both federal and state laws. OtterSec claims damages for conversion and breach of fiduciary duty, while Robert Chen seeks restitution for the financial losses incurred due to David’s alleged actions.
Additionally, the complaint reveals that David Chen’s alleged misconduct extended to accessing and stealing funds from an OtterSec cryptocurrency wallet, which resulted in a loss of over $18,000 worth of tokens. The complaint alleges David used stolen credentials to gain unauthorized access to this wallet, further compounding the financial damage inflicted on OtterSec.
Robert Chen, who is now the sole member of the dissolved OtterSec LLC, purchased all claims OtterSec had against David Chen as part of an asset purchase agreement in September 2022. This agreement allows him to pursue legal action for the damages incurred due to David’s alleged misconduct.
The jurisdiction for this case is based on federal question jurisdiction, as Robert Chen has asserted claims under the Defend Trade Secrets Act. The plaintiffs also argue for diversity jurisdiction, as the amount in controversy exceeds $75,000 and there is complete diversity of citizenship between the parties involved.
The complaint emphasizes the substantial impact of David Chen’s actions on the operations and future prospects of OtterSec. The plaintiffs seek justice and remedies through the legal system for the losses they incurred, asserting that David’s conduct constituted a serious breach of trust and fiduciary duty.
Please contact BlockTribune for access to a copy of this filing.
