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An investor with almost $2 million in frozen funds bankrupt cryptocurrency blockfi lender filed a class action lawsuit against its founders, two directors and crypto gemini exchange.
In a Feb. 28 complaint filed in the U.S. District Court for the District of New Jersey, investor Trey Greene accused the defendants of numerous wrongdoings, including violating the consumer fraud and exchange acts, breaching its fiduciary duties, as well as offering and selling unregistered securities.
“Non-registered shares sold by CIB [BlockFi] Defendants on behalf of BlockFi were marketed and sold via a steady stream of misrepresentations and material omissions by Prince and Marquez over several years and through intermittent misrepresentations by Defendant Gemini.”
Greene states that he has invested more than $1.5 million in interest accounts that are presumed to be non-registered securities and has accumulated more than $400,000 in capital gains and interest earned that have been reinvested.
He is currently unable to withdraw the funds, however, after BlockFi froze all withdrawals on Nov. 10, 2022 — the same day FTX filed for bankruptcy.
Greene further claims that he was induced into buying the “unregistered securities” by misrepresentations from BlockFi’s founders Zac Prince and Flori Marquez that the offerings were comparable to federally-insured bank products.
While the Securities and Exchange Commission (SEC) had charged BlockFi with “failing to register the offers and sales of its retail crypto lending product,” on Feb. 14, the filing claims the exchange had “admitted its [interest] accounts were unregistered securities” during the proceedings that resulted in a $50 million settlement on Feb. 15.
Related: FTX ex-director Nishad Singh pleads guilty to fraud charges
Tyler Winkevoss' Gemini previously held custody of BlockFi clients' crypto assets through its custodial services, and it is alleged that they made false statements about the accessibility of these funds to clients.
"The gemini was aware.", and went along, false and misleading statements regarding the state of the security and accessibility of the property of the plaintiff and the members of the gemini class action and the risk of loss. Gemini supplied materially false and misleading information to BlockFi for use in marketing the BIAs [BlockFi interest accounts].”
Gemini is alleged to have breached the exchange act but was not included in the other allegations.
Greene wants damages on every count, including "triple damages" in the event of a breach of the Consumer Fraud Act, His attorneys' expenses, a full repayment of all funds acquired by the defendants and interest earned, and a judgment for the prevention of similar offences under the Consumer Fraud Act.
The persons represented in the class proceeding are all blockfi shareholders who have purchased their non-registered blockfi interest accounts between Mar. 4, 2019 and Nov. 10, 2022
The accused will receive a subpoena, and must respond to the complaint within 21 days or be required to pay in full the amount requested by Greene.
Cointelegraph contacted Gemini and BlockFi but received no response before publishing.
