Over the past year, the plaintiffs' bar and Securities and the Exchange Commission (SEC) have brought class and enforcement action proceedings, respectively, against those involved with the issuance and marketing of initial coin offerings (ICOs), including those located outside the United States. The proceedings involving foreign defendants present the interesting and threshold issue in these litigations of whether personal jurisdiction in U.S. courts exists over these defendants. Until recently it was unclear how courts would apply traditional jurisdictional analysis to these token-offering participants.
Two recent decisions this August – a U.S. District Court for the Northern District of California decision in a securities class action and an Eastern District of New York decision in an SEC enforcement action – bring more clarity to this issue. The decisions in In re Tezos Secs. Litig., No. 17-CV-06779-RS (N.D. Cal. Aug. 7, 2018), and SEC v. PlexCorps, No. 17-CV-7007 (CBA) (RML) (E.D.N.Y. Aug. 9, 2018) (unpublished), reveal that federal courts on both coasts are broadly applying traditional jurisdictional analysis to hale many – but not all – of these foreign defendants into U.S. courts. Given the ubiquity of foreign ICOs last year and the continuing pace of over $7 billion raised in the first half of 2018, these decisions provide important guideposts on the types of activities where U.S. jurisdiction over foreign parties will likely apply.
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