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Balestra v. ATBCOIN LLC

United States District Court for the Southern District of New York

March 31, 2019, Decided; March 31, 2019, Filed

17-CV-10001 (VSB)

Opinion

 [*346]  OPINION & ORDER

VERNON S. BRODERICK, United States District Judge

Plaintiff Raymond Balestra, individually and on behalf of all others similarly situated, brings this putative class action against Defendants ATBCOIN LLC, Edward Ng, and Herbert W. Hoover, alleging that Defendants violated the Securities Act of 1933 (the "Securities Act" or the "Act"), 15 U.S.C. §§ 77a, et seq., by selling unregistered securities through an initial coin offering of the digital asset ATB Coin. Before me is Defendants' motion to dismiss Plaintiff's Complaint for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2), and for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Because I find both that Plaintiff has established a prima facie case of personal jurisdiction over all Defendants, and that the Complaint plausibly alleges violations of §§ 12(a) and 15(a) of the Securities Act, Defendants' motion to dismiss is DENIED in its entirety. Plaintiff's [**2]  unopposed motion for appointment as Lead Plaintiff and the appointment of Levi & Korsinsky, LLP as Lead Counsel is GRANTED.

I. Background1

Defendants Edward Ng and Herbert W. Hoover are co-founders and officers of Defendant ATBCOIN LLC ("ATB"), a technology start-up company aimed at facilitating rapid, low-cost digital financial transactions through revolutionary blockchain technology. (Compl. ¶¶ 3, 15-16.) From June 12, 2017 through September 15, 2017, ATB conducted an initial coin offering, or "ICO,"2 through which ATB offered digital "ATB Coins" to the general public in exchange for other digital assets  [*347]  (the "ATB ICO"). (Id. ¶ 2.) Defendants promoted the ATB Coin as "an innovative decentralized cryptocurrency incorporating the advanced technologies that tailor the needs of primary market players—users, investors, and business owners." (4/27/18 Kupka Decl. Ex. 1, at 2.)3 The ATB Coin was "designed to overcome well-known inefficiencies within government central banks and other crypto currencies [and to] induce[] transactions that are fully secure, private and anonymous." (Id.)

The primary purpose of the ATB ICO was to raise capital to enable Defendants to create and launch a new blockchain (the "ATB Blockchain") on which the ATB Coins would operate. (Compl. ¶ 3.) According to Defendants, the ATB Blockchain would be "the fastest blockchain-based cryptographic network in the Milky Way galaxy," capable of delivering "blazing fast, secure and near-zero cost payments to anyone in the world." (Id.) During the ICO, Defendants issued a range of promotional materials touting the ATB ICO as an investment opportunity. (Id. ¶ 33; see also id. ¶ 4 ("Only 3 days left before the launch of ATB Coin! Invest in the cryptocurrency of the future, while the project offers the most favorable terms!"); id. ¶ 28 ("Now every investor has [**4]  the opportunity to become apart [sic] of the world technological evolution!"); id. ¶ 38 ("Grab the chance to invest in a very prospective project and change your life by filling it with new financial opportunities!").) Based on Defendants' statements in these materials, participants in the ICO expected the value of the ATB Coins they purchased to increase as more users adopted the ATB Blockchain. (Id. ¶ 42.)

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380 F. Supp. 3d 340 *; 2019 U.S. Dist. LEXIS 55972 **; Fed. Sec. L. Rep. (CCH) P100,396; 2019 WL 1437160

RAYMOND BALESTRA, individually and on behalf of all others similarly situated, Plaintiff, - against - ATBCOIN LLC, EDWARD NG, and HERBERT W. HOOVER, Defendants.

CORE TERMS

Coins, lead plaintiff, investors, appointment, Blockchain, marks, quotation, Defendants', offering, tokens, allegations, profits, Securities Act, motion to dismiss, contacts, launch, purchasers, digital, financial interest, commonality, notice, technology, currency, courts, refers, horizontal, investment contract, lead counsel, unregistered, Declaration