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On the heels of a landmark ruling in favor of the U.S. Securities and Exchange Commission (SEC), plaintiffs took aim at the virtual currency industry by filing a series of securities class action complaints. Like the SEC, private litigants are primarily alleging that virtual currency companies violated §§5 and 12(a)(1) of the Securities Act of 1933 by engaging in the unregistered sales of securities by launching initial coin offerings (ICOs). But private litigants are not government regulators. Unlike the SEC, private litigants face significant procedural obstacles in bringing unregistered sale of securities claims, including a much shorter statute of limitations. While the SEC has five years to bring suit, plaintiffs accusing virtual currency companies of §§5 and 12(a)(1) violations must do so within one year of their most recent purchase of the subject virtual currency. Even plaintiffs that meet the one-year deadline could still be barred by the statute of repose, which concludes three years following the first “bona fide offering” of the virtual currency. This is significant because some of the most prominent and well-funded ICOs offered “pre-sales” of its virtual currency in 2016 and early 2017, so the time to bring suit for the unregistered sale of securities may have already lapsed. While the SEC has enjoyed some limited success, many private plaintiffs’ cryptocurrency securities class action lawsuits will likely be stopped short because of time limitations.

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