{"id":14413,"date":"2022-10-07T14:21:05","date_gmt":"2022-10-07T14:21:05","guid":{"rendered":"https:\/\/nftandcrypto-news.com\/crypto\/get-your-money-back-the-weird-world-of-crypto-litigation-cointelegraph-magazine\/"},"modified":"2022-10-07T14:21:07","modified_gmt":"2022-10-07T14:21:07","slug":"get-your-money-back-the-weird-world-of-crypto-litigation-cointelegraph-magazine","status":"publish","type":"post","link":"https:\/\/nftandcrypto-news.com\/crypto\/get-your-money-back-the-weird-world-of-crypto-litigation-cointelegraph-magazine\/","title":{"rendered":"Get your money back: The weird world of crypto litigation \u2013 Cointelegraph Magazine"},"content":{"rendered":"
Want to sue a crypto project that ripped you off? That will be $1 million, thank you. Luckily, there are options for those who face the daunting prospect of spending a small yacht\u2019s worth of money in lawyer fees for their chance at crypto justice.<\/strong><\/p>\n In practice, the majority of victims of international blockchain <\/span>scams<\/span> find themselves with little hope of recovering their money. According to crypto law expert Jason Corbett, a normal court case to recover $10 million\u2013$20 million dollars in the blockchain sector can easily cost between $600,000 and $1 million, with an average timeline of 2.5 years.<\/span><\/p>\n But there are a range of cheaper and better options to get a successful outcome \u2014 if you learn how to work with the system. Legal investment funds can finance your case for a share of the judgement \u2014 sort of like a VC firm for lawsuits.<\/p>\n \u201cThe vast majority of lawsuits \u2014 up to 95% \u2014 are privately settled before they go to court,\u201d Corbett says. Corbett has six years of experience in crypto law as a managing partner of international blockchain-specialized boutique law firm Silk Legal. Speaking with Magazine about his new crypto litigation financing project Nemesis, Corbett notes a clear \u201cincrease in disputes stemming from deals gone wrong, contractual breaches and bad actors over the past months\u201d due to the bear market, which has seen many projects go sideways.<\/span><\/p>\n There are a variety of common disputes involving blockchain, from misuse of funds to smart contract failures, which are listed below.<\/span><\/p>\n Misuse of investment proceeds<\/strong> happens when \u201cfundraising proceeds go to founders\u2019 Lambos and villas\u201d instead of legitimate business needs, he explains. While the occasional boat party networking or team-building event might be justifiable, salary packages are the main permissible routes by which invested capital can flow to the founders \u2014 even dividends can only be paid from profit, not incoming investments.<\/span><\/p>\n\n The sale of fraudulent crypto happens when a token is sold to investors based on false claims. A possible (though not tested in court) example is found with the automated market maker protocol <\/span>SudoRare<\/span>, which suddenly shut down and disappeared with investors\u2019 money. Such cases can easily cross the threshold into criminal territory, according to Corbett. However, he admits that pursuing the culprits can be very difficult unless the scammers have been reliably identified.<\/span><\/p>\n Illegal securities offering.<\/strong> One way that investors in flopped tokens can attempt to claw back money is by claiming <\/span>securities fraud<\/span>, demonstrating that the offering was illegal in the first place, such as an unregistered securities offering masquerading as a utility token sale. <\/span>\u201cThere are currently several U.S.-based class action lawsuits running against U.S. projects,\u201d such as those against <\/span>Bitconnect<\/span>\u00a0and <\/span>Solana<\/span>. Corbett explains that such claims fall under securities law, being civil claims as opposed to those brought by the likes of the SEC classifying projects like Ripple as securities.<\/span><\/p>\n Difficult organizations to sue.<\/strong> Another area that can present a legal minefield is <\/span>DAOs<\/span>, which are often \u201cnot registered anywhere and don\u2019t have any kind of legal personality, and individuals are just working on their behalf.\u201d Corbett warns that such arrangements can easily expose unsuspecting DAO workers to vicarious liability since the entity they believe they are acting on behalf of may not actually exist.<\/span><\/p>\n Even <\/span>smart contract disputes<\/strong> can lead to the courtroom. \u201cIf two parties agree to act according to a certain trigger on a smart contract, but it somehow malfunctions, that can put a lot of liability on the coder or smart contract audit firm,\u201d Corbett says. In such cases, the insurance policies of audit firms become critical.<\/span><\/p>\n
<\/span><\/p>\nCommon blockchain disputes<\/h2>\n