A securities suit against rapper T.I. over the FliK initial coin offering (ICO) has likely been heard for the last time in court.
But now a lawyer involved believes it may still set a useful legal precedent for future complaints, reports Law360.
In 2019, investor Kenneth Fedance proposed a class-action securities suit against entertainment exec Ryan Felton and T.I. (real name Clifford Joseph Harris Jr).
In the complaint, he claimed that while FLiK tokens were sold with the promise of major returns, his $3,000 was lost after T.I. and business associate Felton dumped their tokens — leaving the crypto next to worthless.
“FLiK is an empty shell that never developed any actual business,” the complaint alleged.
The suit was however dismissed as it was filed outside of a statute of limitations written into the Securities Act.
A workaround for expired securities suits
Lawyer Alexander Loftus — who represented the investor — is nevertheless hopeful an appeal would find “equitable tolling” may not apply when there’s “misrepresentation about the nature of the investment.”
As noted by Law360:
- Equitable tolling means a statute of limitations can’t apply when the plaintiff didn’t understand the injury until after the fact.
- One year’s statute of limitation applies on securities lawsuits (Section 12(a)(1) of the Securities Act).
- The plaintiff is arguing he didn’t know the FLiK token was a security until a 2019 court decision.
In September 2020, T.I dodged criminal charges for his involvement in the FLiK ICO by agreeing to abstain from participating in the crypto market for five years, plus a $75,000 settlement with the SEC.
Utility tokens offer more than an investment
Judges reportedly addressed Fedance’s claim on a Wednesday Zoom call.
Fedance pinned his hopes on FLiK’s purported utility — which would make it a so-called “utility token” instead of a “security token” — as to why he didn’t consider a securities suit earlier.
The court disagreed, pointing out that Fedance did in fact have all the information needed to make such a claim at the time of the original transaction.
Addressing Fedance’s lawyer, judge William H. Pryor Jr. said: “These aren’t Chuck-E-Cheese tokens. Your complaint is riddled with paragraphs about the investment nature of these tokens and that your client reasonably expected to receive a profit from them.
“Your client wasn’t in any way misled about what they needed to know that they have a [securities] claim here.”