XRB investors have sued Nano, the rebranded firm that issued those tokens, and requested that the company be ordered to execute a hard fork in order to restore stolen funds.
A newly filed class action lawsuit seeks a hard fork of the Nano network in order to make whole customers of the BitGrail cryptocurrency exchange whose holdings in Nano tokens, or RaiBlocks (XRB) as they were known at the time, were stolen while under the marketplace’s custodianship.
On February 9, the exchange revealed that approximately 17 million XRB, representing about 80 percent of the XRB on the platform and worth some $170 million at the time, had been transferred out of its possession through “unauthorized transactions.”
The class action filing, dated April 5 and submitted to the United States District Court for the Eastern District of New York, lists Arizona resident and BitGrail customer Alex Brola as the lead plaintiff. The Texas-based Nano, as well as Nano core developers Colin LeMahieu, Mica Busch, and Zack Shapiro (spelled “Zach” in the document) and the company’s public relations specialist, Troy Retzer, are named as defendants.
Absent from this list is BitGrail’s “founder and principal operator,” Francesco Firano, who, along with the exchange, was based out of Italy at the time of the theft.
The suit contends that based on the defendants’ “assistance, promotion, and instruction, BitGrail became the predominant and nearly exclusive home for XRB” and that XRB tokens accounted for the bulk of the exchange‘s trading volume. Nano and BitGrail, it claims, “mutually profited” from a “very close relationship,” and the developers named in the suit publicly encouraged would-be investors to use the platform despite knowing that “BitGrail and/or NANO’s systems were inherently flawed.”
The defendants blamed BitGrail’s security for the heist, according to the filing, a charge that Firano denies.
The particular hard fork requested in the document, which it refers to as a “rescue fork,” would “eliminate all of the ‘missing’ XRB” and reissue equivalent tokens “in a manner that would fairly compensate” the plaintiff and class for all XRB they lost as a result of the theft. It refers to this outcome as “the most direct” way to address investor grievances, but contends that the Nano team has resisted this “strategy because it is not in their own best interests … Defendants still own and control millions … of XRB and do not want to sacrifice any financial advantage they currently hold over the average XRB investor victimized” by the theft. The filing argues that the requested fork would have this adverse financial impact on the defendants.
Additionally, the plaintiff is requesting the “return to Plaintiff and the Class all cryptocurrency or fiat currency they paid as a result of Defendants’ unlawful and unfair business practices and conduct.” The suit also asks for various other damages to be awarded and for the return of Nano tokens still on the BitGrail platform, which cannot be withdrawn because the exchange has suspended “all account activity,” to their rightful owners.
Perhaps in order to bolster other contentions made in the filing, the suit alleges that the defendants “offered and sold” XRB tokens as “unregistered securities in violation of the federal securities law.”
It’s unclear how the plaintiff’s arguments might be received in court. Specifically, while one could make the case that a hard fork would hurt the value of the defendants’ holdings differently than it would hurt other investors’, there seems to be at least one plausible counterargument to this assertion: If the defendants did not receive any of the stolen tokens, then eliminating and reissuing them will not impact the volume of their holdings, denominated in Nano tokens. If the value of those holdings dropped as a result of a hard fork, the same decrease in value would affect all Nano tokens equally.
A hard fork solution also raises a number of important questions: If, after the theft, stolen tokens were sold to non-criminal actors who were unaware that they had been taken in the heist, is it justifiable to “eliminate” these parties’ tokens in order to make whole the plaintiff and class? If a judge were to issue a ruling that required a network split, would entities running nodes be in violation of the ruling if they failed to support the forked chain? Finally, if the Nano team did execute the fork on a judge’s order, would they be obliged to develop code for that new chain, or could they fork it and then abandon it by continuing to work on solutions for the older code base, potentially leading to a devaluation of the tokens on the new platform?
Redmins, one of the law firms listed on the filing as the Counsel for Plaintiff, is also behind one of several class action lawsuits against blockchain startup Tezos.
Read the Full Article:
Class Action Suit Against Nano Core Devs Calls For Hard Fork
