After a year in the courts, a pair of New York law firms has dropped their lawsuit against privacy-focused crypto network Status. The lawsuit alleged that Status’s co-founders were nowhere to be found three years after raising $100 million in, it further alleged, an illegal.
Status co-founder Carl Bennetts, who spoke to Decrypt about the lawsuit for the first time since we covered it last August, said that the lawsuit was “frivolous,” and that it hurt the reputation of the company so much that banks refused to work with Status.
“Banks are incredibly conservative, and so when they do due diligence on the organization, they see some of the media coverage and that’s created some hesitations,” he said. The law firms have not explained why they dropped the case and did not respond to Decrypt’s requests for comment.
The lawsuit, filed in April 2020, alleged that Bennetts and co-founder Jarrad Hope misled investors into investing in their $100 million 2017 ICO by telling them that sales were not subject to US securities laws. Status’s coin powers its crypto network, which comprises an encrypted messaging app,and browser.
Last August, Status’s lawyers told the court that the plaintiff, Joel Deutsch, bought $35 worth of STN in 2020, which he could sell for a profit of $69. Therefore, “the plaintiff literally has suffered no losses of any kind,” argued the lawyers.
Furthermore, Bennetts alleged that the Deutsch, bought the Status tokens on a Chinese crypto exchange that operated from the Polynesian island of Samoa—not directly from Status Network, which didn’t sell to US investors.
Deutsch never responded to those claims in court, and Decrypt could not reach his lawyers for comment. In similar cases, judges have concluded that crypto companies can’t stop US investors from accessing tokens sold in ICOs.
Another sticking point, noted in a letter to the court in August 2020, was that Deutsch’s lawyers couldn’t find Bennetts and Hope. The co-founders, said Deutsch, had “skirt[ed] liability by vanishing into the fog of internet obscurity.”
Deutsch, who also spoke on behalf of other (unnamed) investors, called the company’s co-founders, Bennetts and Hope, “unscrupulous actors” who sought to “take advantage of American markets, consumers and resources.”
But “we never went [anywhere],” said Bennetts; he said he was a resident of Thailand in 2019 and 2020, and that his lawyers were in constant conversation with the lawyers.
Bennetts speculated that the plaintiff’s lawyers may have been concerned that Status is incorporated in Switzerland, and that Bennetts and Hope are not US residents; this could make it cumbersome for US courts to go after them, he said.
The lawyers dropped the lawsuit at the end of April without citing a reason. The lawsuit against Status was one of 11 similar suits filed against ICOs by law firms Selendy & Gay PLLC and Roche Cyrulnik Freedman LLP. The lawyers couldn’t be reached by press time.