- California resident Daniel Ocampo has filed a new class action lawsuit against Dfinity alleging the firm violated the 1933 U.S. Securities Act.
- The plaintiff claims that Dfinity created ICP tokens out of thin air and sold them without filing appropriate registration.
- The complainant aims to seek compensation for the ICP investors the lawsuit represents for the financial damages they suffered.
A group of ICP investors has filed a new class action lawsuit accusing Dfinity of selling unregistered securities.
Class Action Lawsuit for Dfinity
A new class action lawsuit has been filed against Dfinity in a California court.
California resident Daniel Ocampo registered the lawsuit claiming Dfinity violated the 1933 U.S. Securities Act.
The legal complaint alleges that ICP, the native token of Dfinity project Internet Computer, is an unregistered security.
It claims that Dfinity created ICP tokens out of thin air and sold them to fund their business operations and partners without filing the appropriate securities registration.
Venture firms Polychain Capital and Andreessen Horowitz, which were two significant Internet Computer stakeholders, have also been sued for their alleged role in the violation.
The complaint has been filed on behalf of several retail investors who purchased the tokens on or after May 10, 2021 and faced huge losses on their investments.
Referring to Howey’s test, the complainant said retail investors had an expectation of profit based upon the efforts of the defendants, and that it was therefore a security.
The plaintiff claimed that such efforts included minting the ICP token in a centralized manner, promoting the token and listing it on major exchanges, and other activities done for the sole purpose of making a monetary gain.
The plaintiff also raised the issue of Dfinity’s profit-driven token economics that caused significant “financial damage” to many retail investors represented in the class action case. The document alleged:
“Defendants have since earned massive profits by selling the retained ICP to the public, without complying with federal securities laws, in what is essentially an ongoing initial coin offering.”
Soon after its initial network launch on May 10, the ICP token quickly collapsed by around 95%, drawing intense criticism from both the Internet Computer community and crypto analysts. One research firm, Arkham Intelligence, concluded that the price crash was a result of Dfinity insiders selling ICP tokens on cryptocurrency exchanges.
According to Arkham, following the network launch, Dfinity insiders sent about $2 billion worth of ICP tokens to crypto exchanges to sell them on the market. This, Arkahm claimed, helped the price to tumble from $700 to below $50 in a matter of weeks.
This complaint demands a jury trial and seeks compensation for the retail investors for the financial damages they suffered.
The lawsuit is a rare instance of a crypto project facing a lawsuit for allegedly violating securities law from its own investors. Such legal proceedings usually come from bodies like the Securities and Exchange Commission.
While many critics have echoed the plaintiff’s allegations, the validity of the claims is yet to be verified by legal procedure. Whether ICP is deemed a security token or not will only become clear as the lawsuit moves forward and more information surfaces.
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