1 F.4th 1278
11th Cir.2021Background
- In mid‑2017 Ryan Felton created FLiK (aka FLiKIO) and announced an August 20, 2017 initial coin offering (ICO) of “FLiK Tokens” to fund a streaming platform; FLiK never registered the tokens with the SEC.
- Clifford “T.I.” Harris (Harris) was promoted as a co‑owner and publicly endorsed the token sale; Felton and FLiK promoted future utility and large price appreciation in whitepapers and social media.
- FLiK Tokens were sold during Aug–Sep 2017; prices briefly rose then collapsed as the platform never launched; FLiK later ceased operations and announced an August 29, 2018 acquisition by a newly formed company.
- Kenneth Fedance purchased $3,000 of tokens on Aug 23, 2017 and sued Felton and Harris on May 10, 2019 asserting claims under Securities Act §§ 12(a)(1) and 15 for sale of unregistered securities, and alleged fraudulent concealment to toll the limitations period.
- The district court dismissed the complaint as untimely, concluding the limitations period for §12(a)(1)/§15 claims was not subject to a discovery rule or equitable tolling; the Eleventh Circuit affirmed but held equitable tolling is not foreclosed by the statute’s text.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the statute of limitations for §12(a)(1)/§15 claims permits equitable tolling (fraudulent concealment). | Fedance: fraudulent concealment tolled the 1‑year limitations period, so his May 2019 suit is timely. | Defendants: §77m’s accrual language and fixed starting point negate equitable tolling for §12(a)(1) claims. | Court: Equitable tolling is presumptively available for the 1‑year statute of limitations; the statute’s text does not foreclose equitable tolling. |
| Whether Fedance plausibly alleged fraudulent concealment sufficient to toll the limitations period. | Fedance: Felton’s and Harris’s misrepresentations about token utility and ongoing promotions hid the securities nature until at least Sept 2018/Apr 2019. | Defendants: Promotional materials and the whitepaper made the investment nature and profit expectations apparent to purchasers in 2017. | Court: Allegations do not plausibly show active concealment of a potential §12/§15 claim or that Fedance exercised diligence; tolling not established, so claims untimely. |
Key Cases Cited
- SEC v. W.J. Howey Co., 328 U.S. 293 (1946) (establishes the Howey investment‑contract test for determining a "security").
- Gabelli v. SEC, 568 U.S. 442 (2013) (discusses accrual and the discovery rule in securities suits).
- Lozano v. Montoya Alvarez, 572 U.S. 1 (2014) (presumption that nonjurisdictional statutes of limitations are subject to equitable tolling).
- Holland v. Florida, 560 U.S. 631 (2010) (distinguishes accrual from tolling principles).
- Cal. Pub. Emps.’ Ret. Sys. v. ANZ Sec., Inc., 137 S. Ct. 2042 (2017) (statutes of repose and the meaning of "in no event").
- CTS Corp. v. Waldburger, 573 U.S. 1 (2014) (statutes of repose may not be tolled).
- United Hous. Found., Inc. v. Forman, 421 U.S. 837 (1975) (examines purchaser motivation — use vs. investment — in securities analysis).
- Rotkiske v. Klemm, 140 S. Ct. 355 (2020) (distinguishes discovery rules of accrual from equitable‑tolling doctrines).