- A California federal judge has dismissed the class-action lawsuit against Dfinity, citing that the claims exceeded the statute of repose
- The court determined that the Securities Exchange Act’s three-year statute of repose barred the plaintiffs’ allegations regarding the sale of unregistered securities
- ICP token buyers had alleged that Dfinity sold its native Internet Computer Project (ICP) tokens as an unregistered security
A California federal judge has dismissed a class-action lawsuit against Dfinity, the organization behind the Internet Computer Protocol (ICP), ruling that the investors’ claims were filed beyond the allowable time frame. The court found that the lawsuit, alleging the sale of unregistered securities, was initiated one year and six months past the Securities Exchange Act’s three-year statute of repose. Had the case gone to court it would have done so against the backdrop of regulatory reform in the matter of crypto securities.
ICP Tokens Were Securities, Buyers Alleged
Investors filed a class-action lawsuit against Dfinity just two months after its public launch in 2021, accusing the company of offering unregistered securities through its ICP tokens. The plaintiffs alleged that Dfinity violated federal securities laws by not registering the tokens with the U.S. Securities and Exchange Commission (SEC) and sought damages for investors who purchased ICP tokens, claiming they were misled about the investment’s nature and potential profitability.
The plaintiffs don’t seem to have put much effort into progressing the case, with little happening in the years since the filing. Dfinity filed a motion to dismiss the case earlier this year, which U.S. District Judge James Donato granted on March 25, determining that the case was “time-barred” under the Securities Exchange Act’s three-year statute of repose.
Judge Donato sided with Dfinity’s argument that it first offered ICP tokens to the public in February 2017, placing the August 2021 lawsuit outside the required timeframe. Judge Donato stated that the dismissal was warranted due to the plaintiffs’ failure to respond to the defendants’ argument regarding the statute of repose, showing a lack of appetite on their part.
Court Case Would Have Been Interesting
Had the case against Dfinity proceeded to court, it would have offered a compelling lens through which to examine the SEC’s evolving stance on digital assets and token classifications. In the wake of the agency’s recent push to bring greater regulatory clarity and enforcement to the crypto sector—particularly around what constitutes a security—the lawsuit could have tested its new reforms in a live judicial setting.
A ruling on whether ICP tokens qualified as unregistered securities would have helped define the legal boundaries for token issuers and investors alike, potentially influencing ongoing and future enforcement actions in a rapidly maturing regulatory environment.
