Trey Greene, an aggrieved investor, has filed a class-action lawsuit against BlockFi’s CEO, Zac Prince; COO, Flori Marquez; and Gemini, a crypto exchange company, claiming that the company breached its fiduciary duty and violated the Consumer Fraud and Exchange Act.
According to the plaintiff, they did this by offering unregistered securities for sale. The lawsuit was filed on February 28, 2023 in the US District Court for the District of New Jersey.
Greene alleged that BlockFi marketed and sold unregistered BlockFi Interest Accounts (BIA) to investors, which amounted to approximately $14.7 billion as of March 2021. He claimed to have invested $1.5 million in an interest account that has accrued $400,000, but he cannot withdraw his investment because BlockFi has restricted fund withdrawals after declaring bankruptcy.
Prince and Marquez were also charged with spreading false information about how the BIA product functions. According to the lawsuit, they said: “Cryptocurrency in your BlockFi Wallet shall at all times remain with you and shall not transfer to BlockFi.” However, the promise was breached despite assurances of the safety of investors’ assets.
Gemini, a crypto exchange company, was included as a collective defendant in the lawsuit. This is because Gemini holds BlockFi client’s cryptocurrencies as a “qualified custodian”. The lawsuit states, “During the class period, both Gemini and BlockFi described themselves as partners. Tyler Winklevoss Gemini’s CEO is also an owner of BlockFi through its participation in BlockFi’s August 2019 Series A funding.”
Greene seeks settlement for all alleged count charges, including treble damages for violating the consumer fraud act, a full refund of all funds acquired by the defendants, and the payment of his legal fees.
— BlockFi (@BlockFi) November 11, 2022
BlockFi filed for Chapter 11 bankruptcy in November 2022 to preserve client value and pursue recoveries on counterparty obligations. The company also promised to release detailed information about its financial standing to the public leading up to the bankruptcy.
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