Ninth Circuit Decision Clears Way for Price Manipulation Case Against CoinMarketCap to Move Forward
On Monday, August 12, 2024, the United States Court of Appeals for the Ninth Circuit issued a ruling in a cryptocurrency price manipulation case involving the digital currency HEX.
The case stemmed from a lawsuit filed by Ryan Cox against CoinMarketCap Opco LLC and several other defendants involved in the cryptocurrency industry. Cox claimed that the defendants artificially suppressed the price of HEX through inaccurate rankings on the influential cryptocurrency information website CoinMarketCap.com.
CoinMarketCap ranks cryptocurrencies based primarily on their market capitalization, which is a calculation of price multiplied by circulating supply. Cox alleged that HEX’s true ranking based on the market cap should have been in the top 20, but CoinMarketCap instead locked its ranking at number 201. This lower placement on CoinMarketCap’s site, Cox argued, made HEX seem like a less attractive investment and caused its price to trade lower than it otherwise would have.
The defendants moved to dismiss the case, asserting that the district court lacked personal jurisdiction over them. The district court agreed, finding that the Commodity Exchange Act’s nationwide service of process provision relied on by Cox did not allow for jurisdiction without also satisfying the Act’s venue requirement. Since the defendants did not have sufficient contacts with Arizona, the court ruled it could not exercise jurisdiction.
However, the Ninth Circuit panel rejected this interpretation. It determined that the Act’s nationwide service provision authorizes jurisdiction regardless of whether the venue is established. The court looked to precedents involving similar service provisions in other statutes, as well as principles of statutory construction. According to the ruling, treating service and venue independently better served the purposes of the Commodity Exchange Act to enforce protections for all market participants and transactions.
Based on this reading, the Ninth Circuit found that the district court had jurisdiction over the U.S.-based defendants, CoinMarketCap and Binance.US, under the Act because both companies maintained sufficient contacts with the nation as a whole. The panel also concluded Cox presented colorable claims against these defendants.
As for the foreign corporate defendant Binance Capital and individual officers, the appeals court agreed with the lower court that the jurisdiction could not reach them due to inadequate contacts with the U.S. However, it ruled the dismissal should have been without prejudice rather than with.
In summary, the Ninth Circuit affirmed in part, reversed in part, and remanded the case back to the district court for further proceedings against the domestic companies consistent with its opinion.
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