Investors Challenge Dfinity’s Motion to Dismiss ICP Crypto Case

News | June 6, 2024 By:

On Tuesday, May 28, 2024, Plaintiffs Henry Rodriguez and Daniel Valenti filed an opposition motion in response to the Defendants’ attempt to dismiss the Second Amended Complaint in the case of Valenti v. Dfinity USA Research LLC, Dfinity Foundation, and Dominic Williams.

The Plaintiffs’ complaint centers around the cryptocurrency token ICP, which was launched in May 2021 by Dfinity, a tech company founded by Dominic Williams. In their opposition, the Plaintiffs argue their claims regarding violations of federal securities laws during ICP’s initial offering should stand.

Specifically, the Plaintiffs claim ICP meets the definition of a security and was required to be registered as such under the Securities Act of 1933. They state the Defendants did not register ICP as a security and failed to provide necessary disclosures to investors. The Plaintiffs allege this violated Sections 5 and 12(a)(1) of the Securities Act.

In their motion to dismiss, the Defendants argued the Plaintiffs’ Securities Act claims were time-barred by the statute of repose in Section 13 of the Act. However, the Plaintiffs argued the statute of repose does not apply to unregistered securities offerings. They state ICP was not bona fide offered to the public until its genesis launch on May 10, 2021, less than three years before the case was filed.

Additionally, the Plaintiffs assert the Defendants are considered “statutory sellers” based on their actions promoting and listing ICP on multiple cryptocurrency exchanges simultaneously on the date of launch. This generated liquidity in the new token. The Plaintiffs state the Defendants undertook these efforts to financially benefit themselves.

The opposition motion also claims the Plaintiffs adequately alleged violations of the Securities Exchange Act of 1934. Specifically, Section 10(b) for making false or misleading statements regarding ICP token distribution and lockup policies. Section 20A for insider trading.

If the judge denies the Defendants’ motion to dismiss, the case will be allowed to move forward to the discovery phase, where both parties can gather more evidence.