A report by Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse (SCAC) shows that the number of ICO and crypto-related federal class action lawsuits in the US has increased to seven in the first half of 2018.
Federal class action securities fraud filings continued at near record levels in the first half of 2018. Plaintiffs have filled more than 750 federal securities class actions since midyear 2016, the most prolific 24-month period since enactment of the Private Securities Litigation Reform Act of 1995 (PSLRA).
The report also shows that core filings increased 28 percent after a sharp decline in the second half of 2017. In a reversal of recent trends, the number of federal filings involving merger and acquisition(M&A) transactions decreased. Nine mega DDL filings (at least $5 billion) and 11 mega MDL filings (at least $10 billion) lifted aggregate market capitalization losses to levels not seen since 2002.
Noticeably, filings against non-US companies declined slightly in the first half of 2018, after increasing every year since 2013. Filings involving Asian and European firms were more than double 1997-2017 historical averages. Driven by nine core filings against internet companies, the Communications sector had 17 filings, seven more than the Financial sector. Class actions related to ICOs or tied to cryptos continued into 2018 with seven core filings.
While the ICO frenzy hit the market last year and is still continuing, it is worth mentioning that the growth in ICO and crypto-related class action lawsuits go in hand with an increase of class action securities lawsuits in general. Starting with mid-2016, there have been filed over 750 federal securities class actions, which is the highest figure for a two-year period since the Private Securities Litigation Reform Act of 1995, the report notes.
Joseph Grundfest, a Stanford Law School professor and former commissioner of the US Securities and Exchange Commission (SEC), said:
“Class action securities fraud litigation continues to affect a large percentage of publicly traded firms. If the trends observed in the first half of the year continue to year-end, approximately 8.5 percent of all companies listed on the NYSE and NASDAQ markets will have been sued in these cases.”