Cryptocurrency fund manager Digital Capital Management has sued law firm Faegre Baker Daniels for providing “erroneous” legal services.
In a lawsuit filed on Tuesday, as reported by Bloomberg Law, Digital Capital Management has said that Faegre Baker provided “inaccurate analysis and advice” to its predecessor, Crypto Asset Management, regarding how to register under the Investment Advisers Act.
In Sept. 2018, Crypto Asset Management was charged by the U.S. Securities and Exchange Commission (SEC) for violating registration requirements. The SEC said at the time that Crypto Asset Management and its principal, Timothy Enneking, raised over $3.6 million in late 2017 and claimed that the firm was “the first regulated crypto asset fund” in the U.S.
Enneking and the firm at the time neither admitted nor denied the SEC's findings and had agreed to a cease-and-desist order and a penalty of $200,000.
The lawsuit now alleges that Faegre Baker advised Crypto Asset Management and Enneking that “Crypto Assets are not securities” and to thus structure the fund’s business “accordingly.” The advice was “erroneous,” the lawsuit states.
The plaintiffs seek compensatory damages, including for fees and costs incurred, reputational harm, lost profits and other consequential damages, per the lawsuit.