Slip Opinion
S.D.N.Y.2021Background
- Plaintiff Timothy Holsworth (substituted class representative) alleges he purchased 587 BNT tokens on September 4, 2019 via the COSS exchange (Singapore) for $212.50 and seeks rescission and damages alleging BNT is an unregistered security.
- Defendant BProtocol Foundation ("Bancor") is a Swiss foundation (offices in Zug and Tel Aviv); individual defendants are Bancor co‑founders/CTO and Israeli citizens. Bancor ran an ICO for BNT on June 12, 2017 that raised ~$153 million.
- The Second Amended Complaint asserts 102 claims (100 state blue‑sky claims; two federal claims under Sections 5 and 12(a)(1) of the Securities Act) alleging issuance, promotion, and sale of unregistered securities and control‑person liability.
- Defendants moved to dismiss for lack of Article III standing, lack of personal jurisdiction, failure to state a claim (including extraterritoriality and lack of privity/solicitation), statute of limitations, and forum non conveniens; they also opposed jurisdictional discovery.
- The Court ruled Holsworth failed to plausibly allege injury (no alleged diminution in value or causal link), lacked a sufficient connection between defendants' conduct and plaintiff's purchase, failed to plead timely claims or tolling, and the court lacked personal jurisdiction; jurisdictional discovery and leave to replead were denied.
- The Court granted the motion to dismiss, entered judgment for defendants, denied repleading, and taxed costs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III standing | Holsworth purchased BNT and suffered harm from unregistered offering; seeks rescission/damages | No plausible allegation of injury or diminution in value; complaint silent on current value or sale | Dismissed for lack of standing; plaintiff did not plausibly allege injury, causation, or redressability |
| Personal jurisdiction | Defendants marketed BNT in the U.S. (conferences, social media) and solicited U.S. buyers including NY | Promotional/global contacts insufficient to establish specific jurisdiction; no causal link between contacts and Holsworth’s purchase | No personal jurisdiction; marketing alone without causation insufficient; jurisdictional discovery denied |
| Failure to state Securities Act claims (sec. 5 & 12) | BNT was sold/offered as unregistered securities; defendants solicited secondary market purchases | No privity or direct solicitation of plaintiff; Section 12 requires statutory seller/solicitation; federal law doesn't reach purely extraterritorial transactions | Claims dismissed for failure to show privity/solicitation and for extraterritoriality under Securities Act principles |
| Statute of limitations / tolling | Claims tolled by concealment and by defendants’ public statements denying securities status | One‑year statute applies to §§5 and 12 claims; no alleged active concealment or fiduciary relation to toll limitations | Claims time‑barred; allegations insufficient to establish tolling |
| Forum non conveniens / venue and discovery request | Israel allegedly inconvenient; seeks U.S. forum and discovery to show U.S. contacts | New York is not a reasonable forum; foreign defendants shouldn’t be haled into NY absent jurisdiction; fishing expedition for jurisdictional discovery improper | Forum non conveniens concerns support dismissal if jurisdiction existed; jurisdictional discovery denied and forum not retained |
Key Cases Cited
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (standing requires injury‑in‑fact, causation, redressability)
- Cooper v. U.S. Postal Serv., 577 F.3d 479 (2d Cir. 2009) (standing elements applied)
- World–Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (specific jurisdiction and forum fairness principles)
- Pinter v. Dahl, 486 U.S. 622 (Section 12 liability requires privity or solicitation by defendant)
- Morrison v. National Australia Bank Ltd., 561 U.S. 247 (federal securities laws do not apply extraterritorially to foreign transactions)
- Best Van Lines, Inc. v. Walker, 490 F.3d 239 (2d Cir. 2007) (limits on jurisdictional discovery absent prima facie showing)
- Chew v. Dietrich, 143 F.3d 24 (2d Cir. 1998) (proximate‑cause requirement for specific jurisdiction where contacts are limited)
- Absolute Activist Master Value Fund, Ltd. v. Ficeto, 677 F.3d 60 (2d Cir. 2012) (no jurisdiction where injury not proximately caused by defendant's targeted contacts)
- Capri v. Murphy, 856 F.2d 473 (2d Cir. 1988) (plaintiff must allege that defendant actually solicited the specific investment)