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NEW YORK, Oct 4 (Reuters) – A U.S. appeals court on Monday revived a lawsuit by investors who claimed they were defrauded into buying the HelbizCoin cryptocurrency as part of a “pump and dump” scheme.
The 2nd U.S. Circuit Court of Appeals said a lower court judge erred in finding he lacked jurisdiction to review Helbiz Inc’s $38.6 million initial coin offering because its coins were not listed on a U.S. exchange or bought domestically.
While not addressing the lawsuit’s merits, the 3-0 decision could be a setback for cryptocurrency firms seeking to avoid liability in U.S. courts by claiming they operated and raised money in foreign countries.
Investors said Helbiz promised to use proceeds from its 2018 offering to develop a smartphone-based transportation rental platform allowing users to rent bikes, cars, scooters and flying drone taxis.
The investors said Helbiz instead kept most of the money for itself, and for almost every rental accepted U.S. dollars, euros and other payment methods, dooming HelbizCoin.
U.S. District Judge Louis Stanton in Manhattan dismissed the lawsuit in January, citing a 2010 Supreme Court precedent that limited the extraterritorial reach of federal securities laws.
But the Manhattan-based appeals court said Stanton should have used a more “tailored” approach, and consider the investors’ claims under New York state law and that state’s rules for applying its laws extraterritorially.
It also said investors could amend their complaint to show that one plaintiff was a Texas citizen who bought HelbizCoin domestically, supporting their federal securities law claims.
Robert Heim, a lawyer for Helbiz, said the company believes the lawsuit “is without any merit whatsoever, and we look forward to a speedy resolution.”
Michael Kanovitz, a lawyer for the investors, said his clients plan also to show that title to their coins were transferred in the United States.
“The fraud is there to be proved,” he said. “We think we’re very well situated to win the case.”
The case is Barron et al v Helbiz Inc et al, 2nd U.S. Circuit Court of Appeals, No. 21-278.
Reporting by Jonathan Stempel in New York
Editing by Marguerita Choy
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