Get Your Money Back: The Weird World of Crypto Disputes

Want to sue a crypto project that scammed you? It will be $1 million, thank you. Fortunately, there are options for those who face the daunting prospect of spending a small yacht's money on attorney fees to have a chance at crypto justice.

In practice, the majority of victims of international blockchain scams are left with little hope of getting their money back. According to crypto law expert Jason Corbett, a normal court case to recover between $10-20 million in the blockchain industry can easily cost between $600,000-1 million, with an average delay of 2 ,5 years.

But there are a range of cheaper and better options to achieve a satisfactory result, if you learn how to use the system. Legal investment funds can fund your case for a share of the judgment - much like a venture capital firm for the lawsuits.

“The vast majority of lawsuits (up to 95%) are settled privately before going to court,” says Corbett.

Common Blockchain Conflicts

Corbett has six years of experience in crypto law as a managing partner at international blockchain law firm Silk Legal. Speaking to Magazine about his new crypto litigation funding project Nemesis, Corbett notes a marked “increase in litigation stemming from deals gone wrong, breaches of contract and bad actors over the past few months” due of the bear market, which has seen many projects go awry.

There are a variety of common disputes involving blockchain, from misuse of funds to failed smart contracts, which are listed below.

The misuse of investment proceeds occurs when "fundraising proceeds go to Lambos and founders' villas" instead of meeting legitimate business needs, he explains. While the occasional networking boat party or team building event may be justifiable, salary packages are the primary permitted avenues through which invested capital can flow to founders – even dividends cannot. be paid only from profits, not from incoming investments.

Scam crypto selling occurs when a token is sold to investors based on false claims. A possible example (although not tested in court) is found with the SudoRare automated market maker protocol, which suddenly stopped and disappeared along with investors' money. Such cases can easily cross the threshold into criminal territory, according to Corbett. However, he admits that prosecuting the culprits can be very difficult unless the crooks have been reliably identified.

Illegal offer of securities. One way investors in flopped tokens can attempt to recover money is to claim securities fraud, demonstrating that the offering was illegal in the first place, such as an unregistered securities offering masquerading as a sale. utility tokens. “There are currently several US-based class action lawsuits against US projects,” such as those against Bitconnect and Solana. Corbett explains that such claims fall under securities law, being civil claims as opposed to those brought by projects like the SEC classifying projects like Ripple as securities.

Organizations difficult to prosecute. Another area that can present a legal minefield is DAOs, which are often "not registered anywhere and have no sort of legal personality, and individuals simply work on their behalf". Corbett warns that such arrangements can easily expose unsuspecting DAO workers to vicarious liability, as the entity they think they are acting for may not actually exist.

Even smart contract disputes can end up in court. “If two parties agree to act on a certain trigger on a smart contract, but the smart contract malfunctions, that can put a lot of liability on the coder or the smart contract auditing firm,” says Corbett. In such cases, insurance policies of audit firms become critical.