On Monday, a federal magistrate in Texas dismissed a securities class action lawsuit against Bancor protocol operators. The judge concurred with a magistrate judge’s findings, asserting that the plaintiffs had failed to establish that US courts had jurisdiction over the foreign defendants.
Based on the magistrate’s recommendation, Judge Robert Pitman determined that Bancor’s foreign operations are not subject to US securities laws.
The plaintiff’s failure to establish that the crypto transactions occurred in the United States or were subject to US jurisdiction was the basis for his decision.
This implies that the plaintiffs cannot file a lawsuit against Bancor in the United States regarding its purported suspension of an investment protection feature.
Bancor, Founders Not Subject to US Jurisdiction, Judge Says
According to the magistrate judge, Bancor, its proprietors, and related entities in Israel or Switzerland are not sufficiently connected to the United States. Consequently, the court lacks jurisdiction over them.
Additionally, he observed that the securities statutes of the United States are inapplicable due to extraterritoriality concerns. He proposed that plaintiffs prosecute their complaints in Israeli courts, as the defendants are located there.
Bancor Hits with Lawsuit After Halting Promised Loss Protection for Investors
The plaintiffs asserted in their complaint that Bancor promoted impermanent loss protection as a feature to safeguard their investments from losses. This feature was purportedly designed to attract liquidity providers to the protocol, resulting in over $2.3 billion in crypto investments.
They requested that the court terminate their contracts. Additionally, they contended that the contracts were rendered invalid by Bancor’s failure to adhere to regulations. Additionally, they accused Bancor of violating Texas laws.
Fraud, mismanagement of funds, fraud, and unjust profiting at the expense of investors were among the allegations.
The lawsuit contained allegations of contract breach and unjust enrichment, as well as violations of the Securities Act of 1933 and the Exchange Act of 1934.
Bancor discontinued impermanent loss protection in 2022 after withdrawals resulted in payment obligations to liquidity providers. Consequently, the lawsuit asserted that providers were confronted with “the very losses that Defendants had promised to ‘100% protect’ against.”
