1:23-cv-00533
W.D. Tex.Jul 31, 2024Background
- Plaintiffs invested in Bancor’s Version 3 crypto-asset exchange, attracted by advertised “impermanent loss protection” and lost money after the promised protection was suspended following a large wave of withdrawals.
- Bancor was developed by a Swiss foundation (BProtocol Foundation) and an Israeli company (LocalCoin, Ltd.), with individual defendants residing in Israel; Bancor DAO is an unincorporated entity with no physical presence.
- Plaintiffs alleged violations of the U.S. Securities Act, Exchange Act, control-person liability, and related Texas state law claims.
- Defendants moved to dismiss for lack of personal jurisdiction, forum non conveniens, failure to state a claim, and inapplicability of U.S. securities laws to extraterritorial conduct.
- The court addressed whether U.S. courts had jurisdiction and whether federal securities laws applied to these international, decentralized transactions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Personal jurisdiction over foreign defendants | Bancor’s contacts (through conferences, website, and employees) should be attributed to all defendants; entity actions should be imputed to individuals due to control. | No direct U.S. contacts by individuals; entity contacts not attributable to individuals; lack of targeted U.S. activity. | No personal jurisdiction over individual defendants; only plausible for entities, but insufficient specific U.S. contacts. |
| Sufficient contacts to assert jurisdiction | Bancor’s U.S. conference activity, social media outreach, and website establish purposeful availment. | Conference attendance and online presence too sporadic/general; not targeted specifically at U.S. investors. | Bancor’s contacts not systematic or targeted enough for jurisdiction. |
| Applicability of U.S. securities laws (extraterritoriality) | Plaintiffs entered contracts in the U.S.; blockchain servers and actions occurred in the U.S.; thus, domestic transaction. | Transactions did not incur irrevocable liability or title in U.S.; Plaintiffs cite cases too factually distinct. | U.S. securities laws do not apply; plaintiffs can litigate elsewhere; Morrison comity concerns present. |
| Dismissal under forum non conveniens | Not directly addressed for this motion; main focus on jurisdictional/statutory issues. | Israel is a proper forum; all parties would be subject to jurisdiction. | Dismissal appropriate; Israel is an available, adequate forum. |
Key Cases Cited
- Morrison v. Nat’l Australia Bank Ltd., 561 U.S. 247 (U.S. 2010) (establishes presumption against extraterritorial application of U.S. securities laws)
- Ford Motor Co. v. Montana Eighth Judicial District Court, 592 U.S. 351 (U.S. 2021) (describes standard for specific personal jurisdiction as "arising out of or relating to" defendant's forum contacts)
- Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408 (U.S. 1984) (distinguishes general from specific personal jurisdiction)
- Walden v. Fiore, 134 S. Ct. 1115 (U.S. 2014) (forum contacts must be attributable to defendant's own, purposeful acts)
- Mink v. AAAA Dev. LLC, 190 F.3d 333 (5th Cir. 1999) (lays out minimum contacts and due process requirements for personal jurisdiction)