Regulation
Digital Capital Management Suing Law Firm over ‘Erroneous Advice’
It has recently come to light that a law firm is being sued for legal malpractice. While this may happen regularly, this particular instance is interesting to note for those involved in the world of blockchain.
This case sees Digital Capital Management suing Faegre Baker Daniels, as they contend that the legal firm provided them with erroneous advice.
Poor Guidance?
The guidance in question stems from actions taken in 2017. When looking to set up and offer an investment fund, Digital Capital Management sought out the advice of a seasoned law firm. Their search brought them to Faegre Baker Daniels.
From here, Digital Capital Management indicates that the firm advised them that crypto-assets are not viewed as securities. As such, the investment fund would not need to be registered with the SEC.
Obviously in the eyes of the SEC, this is false. The result were various enforcement actions taken by the regulatory body against Digital Capital Management.
Penalties Laid
Regardless of where fault may lay, it was Digital Asset Management that undertook the actions in violation of securities laws. This is what matters to the SEC, and the regulatory body acted accordingly.
The ICO in question is said to have raised, roughly, $3.6M from 44 investors over the course of 4 months, in 2017. As a result, the SEC imposed orders to cease and desist, as well as a $200,000 fine. Each of which were met by the company, with an agreement that no fault is admitted.
Aftermath
With the actions taken by the SEC, Digital Capital management feels as though they are the victims. As such, their legal malpractice suit against the firm involves seeking compensation on various fronts (damages done, legal fees, etc.).
Commentary
In documentation filed, surrounding the lawsuit, Digital Capital Management touches on the various areas in which they believe the law firm provided erroneous advice. The following points are simply a few of those listed.
- “In particular, Defendant advised Plaintiff that funds should be offered under Regulation D via Rule 506(b) as opposed to Rule 506(c).”
- “Defendant further advised Plaintiffs that Crypto Assets are not securities and to structure CAF’s and the Fund’s business accordingly.”
- “The Defendant’s advice, including but not limited to that set forth above, was erroneous”
Digital Capital Management
Founded in 2018, Digital Capital Management maintains headquarters in San Diego, California. Above all, the company operates as a manager of investment portfolios, underpinned by digital assets such as cryptocurrencies.
Managing Director, Timothy Enneking, currently oversees company operations.
Faegre Baker Daniels
With over 150years worth of history, Faegre Baker Daniels has managed to establish themselves as one of the largest law firms in the United States. The company maintains a presence in various locations around the world, including London, Beijing, Silicon Valley, and more.
Chair, and Managing Partner, Tom Froehle, currently oversees company operations.
In Other News
Over the past year, the SEC has been hard at work keeping participants in the world of blockchain in check. The following articles are just a few examples of other actions taken by the regulatory body over this time, as they look to ensure market safety for investors.
Gladius Fails to Pay SEC Fines
