A U.S. federal court has taken a substantial step in allowing a class-action lawsuit to proceed against the creators of HelbizCoin, marking a pivotal moment in this nearly three-year-long legal battle. The lawsuit was originally filed in 2020 against Helbiz, its CEO Salvatore Palella, and their partners. In March 2022, an amended complaint was submitted, shaping the contours of this protracted legal dispute.
HelBiz’s ICO and the Alleged Deceptive Scheme
The heart of the case revolves around HelBiz, an Italian electric scooter-sharing company, which conducted an ICO in 2018, raising $38.6 million and issuing an ERC-20 token. The complaint alleges that this ICO was conducted in partnership with Anthony Di Iorio, a co-founder of Ethereum.
This class-action lawsuit represents a group of investors, potentially numbering up to 20,000, who assert that HelbizCoin was part of a deceitful “rug pull” and fraudulent “pump-and-dump” scheme. They contend that Helbiz made false statements and promises to entice individuals to purchase the tokens, with the bulk of the ICO funds allegedly retained by the company.
The Classification as a Security
A notable development in this case is the court’s determination that the ERC-20 token in question qualifies as a security under federal law. This classification adds a layer of complexity and legal implications to the lawsuit.
The lawsuit faced initial challenges when a lower court judge dismissed it in January 2021, citing a 2010 Supreme Court precedent that limited the application of federal securities laws beyond U.S. borders. However, the case received a new lease of life in October 2021 when the 2nd U.S. Circuit Court of Appeals declared the lower court judge’s decision incorrect, leading to the filing of an amended complaint in March 2022.
The appeals court contested the lower court’s claim of lacking jurisdiction to review Helbiz Inc.’s ICO, arguing that the coins not being listed on a U.S. exchange or acquired domestically did not preclude jurisdiction.
Recent Ruling: Mixed Outcomes
On September 1, 2023, the U.S. District Court for the Southern District of New York delivered a significant ruling in the HelbizCoin case. Some motions to dismiss were granted, while others were denied.
The court dismissed claims against certain defendants due to a lack of personal jurisdiction, including Paysafe, Skrill, Decentral, and Alphabet. Additionally, claims involving breach of contract, tortious interference, and specific securities claims were also dismissed for inadequately stating valid claims.
However, the ruling validated certain claims made by the investors, including allegations related to fraud, price manipulation, violations of securities and commodities laws, the RICO (Racketeer Influenced and Corrupt Organizations) Act, and unjust enrichment against specific defendants.
This pivotal ruling sets the stage for further legal proceedings in this complex and closely-watched class-action lawsuit.
