Platinum-backed ICO token sale allegedly misses sales target and refuses to pay

Disclaimer: These summaries are provided for educational purposes only by Nelson Rosario and Stephen Palley. They are not legal advice. These are our opinions only, aren’t authorized by any past, present or future client or employer. Also we might change our minds. We contain multitudes.

As always, Rosario summaries are “NMR” and Palley summaries are “SDP".

[related id=1]Platinum Trading Institute of America, Inc. v. Platinum Investment Associated Limited, Case №1:19-cv-167 (S.D. Ohio March 4, 2019)[NMR]

When two parties want to do business together they may enter into a contract. That contract should clearly (as is feasible) lay out each party’s rights and obligations concerning the arrangement, as well as how disputes concerning the agreement will be adjudicated. This is good business, and a way to manage risk. This is true if you’re selling cheese to a supermarket or training people to sell platinum backed ICO tokens. One common area of disagreement is where compensation is based on sales volume. That’s what this case involves.

This case involves a UK based company, Platinum Investment Associates (“PIA”), and a US based company, Platinum Trading Institute of America (“PTIA”). PIA is engaged in the business of training people to trade cryptocurrencies as well as ICO tokens. Seeking entry into the U.S. market PIA entered into an agreement with PTIA on May 1, 2017, whereby PTIA would help sell PIA’s service offerings to U.S. residents.

Allegedly, for the right to be PIA’s exclusive U.S. representative for seven years, PTIA paid 100,000 pound sterling to PIA. In negotiating that agreement it appears that PTIA included a hedge for when sales were not robust. Specifically, the parties agreed to the following “[i]f the gross sales of [PIA] products in the Territory did not amount to a sum of $100,000.00 (US Dollars) during the first year of the Agreement, PIA was required under this [agreement] to pay PTI-A 35,000 pounds sterling on May 31, 2018.” Yes, but how do you prove whether sales exceed that amount? You provide documentation of course, and here is where dispute begins.

Allegedly, the first-year sales did not hit the $100,000 target. That would mean PIA has to pay 35,000 pounds to PTIA. Well, apparently, May 31, 2018 came and went and PIA had not paid the 35,000 pounds to PIA, so an amendment to the original agreement was negotiated between the parties with an effective deadline of Feb. 28, 2019 for the sales goal. That deadline came and went and PTIA alleges two things: 1) PIA refuses to turn over documentation to ascertain the sales in the U.S. related to PTIA’s efforts, and 2) refuses to pay the 35,000 pound sterling.

PTIA wants the documentation concerning the sales numbers, because they are alleging that PIA fraudulently induced PTIA into an agreement knowing they would never pay them the money. An interesting wrinkle concerning the documentation, which is not really discussed much in the complaint but may show up in PIA’s response, is that the records at issue are supposedly kept in India. It’s not clear why in our electronic age of PDFs and magic internet money that documents stored elsewhere in the world would be an issue in this case, but I suppose we will find out with PIA’s response.

The Block is pleased to bring you expert cryptocurrency legal analysis courtesy of Stephen Palley (@stephendpalley) and Nelson M. Rosario (@nelsonmrosario). They summarize three cryptocurrency-related cases on a weekly basis and have given The Block permission to republish their commentary and analysis in full. Part II of this week's analysis, Crypto Caselaw Minute, is above.