Two law firms, Silver Miller and Levi & Korsinsky, have filed a class action lawsuit on behalf of investors against defendant Nano (formerly known as RaiBlocks) according to a January 7 press release. The suit alleges that Nano and members of its core team violated federal securities laws by engaging in an unregistered offering and sale of securities. The complaint also alleges that the defendant directed investors to place their Nano tokens (XRB) in the Italian crypto exchange BitGrail, where $170 million worth of XRB allegedly “disappeared” in February 2018.
The suit’s complaint states that BitGrail became the “predominate and nearly exclusive home for XRB” based on Nano’s assistance, promotion, and instruction. At one point, XRB made up 80 percent of BitGrail’s overall trading volume. Despite warnings from BitGrail’s CEO Francesco Firano that there were “major issues” with the Nano protocol, Nano continued to direct investors to use BitGrail. The complaint goes on to allege:
“Simply stated, the Nano Defendants created the XRB currency, they directed XRB investors to place their assets at BitGrail (an exchange that they essentially controlled); and when nearly all of the XRB purportedly safeguarded at BitGrail disappeared, Defendants disavowed any responsibility for the harm the XRB investors suffered.”
The suit’s plaintiffs are asking that their investments be rescinded and for Nano to “rescue fork” the missing XRB. The complaint states that Nano “can rewrite the XRB code and simply restore ownership to Plaintiff … [Nano], however, have refused to implement that strategy because it is not in their own best interests.”
This isn’t the first time Nano has been hit with a lawsuit relating to the XRB/BitGrail dilemma. In April 2018, Silver Miller filed a class action lawsuit on behalf of lead plaintiff Alex Brola. The suit similarly claimed that Nano had violated securities laws and asked that Nano hard fork its network in order to restore investors’ money.
In September 2018, Nano filed a motion to dismiss. Nano argued that XRB could not be classified as a security because the company had never gained any money in exchange for XRB tokens. The dismissal further states, “Nano’s value does not derive from a group of managers or executives managing other people’s property; rather, Nano’s value is derived from its utility or potential utility as a currency.”
Security or not, Brola voluntarily dismissed the suit in October 2018. While Brola’s voluntary dismissal gave no reason for dropping the case, lead defense counsel Peter Scoolidge told Law360 that “the plaintiff withdrew the complaint because the case lacked merit.”