November 04, 2021
by Jonah R. Hecht

 

On Monday, a Connecticut class action jury found that a series of digital-asset products linked to a cryptocurrency mining operation do not constitute securities under federal law.  The case is captioned Denis Marc Audet v. Stuart A. Fraser, 3:16-cv-00940 (D. Ct.).  Defense counsel stated that Audet was the first case he was aware of where a jury addressed whether cryptocurrency products were securities.  Defendants were two companies that offered remote management software that purportedly allowed customers to control their physical mining hardware online.  Of the four products at issue, defense counsel argued to the jury that Paycoin was a currency and “Hashtakers” were simply virtual wallets for storing Paycoin.  He argued the other two products, “Hashpoints” (which the plaintiffs described as promissory notes that could be converted into the companies’ virtual currency) and “Hashlets” (which gave purchasers a portion of the computing power the companies purportedly owned without receiving the physical software) were not securities.  In an action against one of the defendants’ founder, the SEC had taken the position that Hashlets are a security.  At least two federal judges had previously ruled that other cryptocurrency products were securities. 

About Blockchain Law Center

Blockchain technology utilizes a distributed digital ledger to record and track information, and can be leveraged to gain transparency and certainty in transactions ranging from cryptocurrency to supply chain tracking.  This blog provides information on the legal developments surrounding implementation of blockchain technology, with an initial focus on the financial services sector.