SAFTs, securities and alleged misrepresentations

Quick Take

  • Fasulo et al. v. Xtrade Digital Assets Inc.
  • Plaintiffs invested $2.5 million in a SAFT and now seek to rescind their (alleged) investment contracts and to recover money damages
  • The token, which had been advertised for issuance at 10 cents, and which had a contractual value of 10 cents as prescribed in the SAFT contract, began trading on these exchanges at under 1 penny in price
  • “Right from the beginning, in a direct attempt to circumvent U.S. securities laws, Defendants refused to execute investment contracts with U.S. investors until a foreign national could be found whose name could be substituted on the contract.”

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]Fasulo et al. v. Xtrade Digital Assets Inc., S.D. Fl., 4/29/19, 1:19-cv-03741 [SDP]

Another day, another lawsuit in federal court in the Southern District of New York alleging multi-million dollar violations of the Securities Act of 1933, the Exchange Act of 1934, and common law fraud, all arising out of a 2017 token sale utilizing a so-called SAFT agreement. (As a reminder, allegations in a lawsuit are just that — unproven claims — by describing the allegations I am not saying they are true, just summarizing what this publicly filed lawsuit says).

According to the Plaintiffs, in 2017 they were presented with a token purchase offer in which they would buy tokens “in bulk, at a substantial discount to the intended public issuance price, and then resell the