How do people know which cryptocurrencies are worth their offering prices and which are simply scams? The complaint for this class action says that Julian (or Juvane) Spence, the seller of the Dark Ripple or DRIP token, implied that his tokens were related to a more established currency called Ripple. This and other false or misleading statements, the complaint says, were violations of the Securities Exchange Act of 1934.
The class for this action is all purchasers of the DRIP token from Julian Spence.
According to the complaint, Spence portrayed himself as a successful venture capitalist, blockchain technology entrepreneur, and cryptocurrency trader, although none of that was true.
He began his efforts to promote DRIP around October 27, 2017, via social media and various online forums. Among other things, he claimed that DRIP was superior to Ripple, but the complaint alleges that there was nothing behind his claims. “While viable blockchain-based companies seeking to develop tokens with the alleged functionality of DRIP often spend well in excess of $500,000 in development costs, Spence used an online service to effectively clone the opensource Ethereum cryptocurrency for the cost of only $50.”
Beginning in November 2017, Spence held a pre-sale during which he sold tokens for two cents. According to the complaint, he touted the liquidity of DRIP and even promised to pay a 5% dividend to early investors in the token. By November 27, the complaint says, Spence had sold over 750,000 of the tokens at a price of 46 Ethereum tokens. (The complaint says that as of its filing date, one Ethereum is worth $563.35.)
Although Spence had promised to work to popularize his DRIP tokens, the complaint says that the only thing he actually did after the pre-sale was to hold an “airdrop”—that is, he gave away tokens for free or for the performance of small tasks, such as social media posting.
The complaint claims that during December, Spence responded less and less to inquiries. As of January 3, 2018, the complaint says, he had removed all mentions of DRIP from the Internet, including the DRIP website and Twitter accounts and a discussion channel on a site called Telegram. The complaint alleges that Spence then “laundered” the proceeds of the sale by transferring the Ethereum to a personal wallet and exchanging them with other cryptocurrencies.
Besides violations of the Securities Exchange Act of 1934, the counts in the complaint include common law fraud, breach of contract, and rescission of contract.