Holsworth v. BProtocol Foundation Case

On April 3, 2020, William Zhang filed a class action lawsuit in the U.S. District Court for the Southern District of New York against BProtocol Foundation (Bancor), a Swiss blockchain-focused foundation, and its co-founders Eyal Hertzog, Guy Benartzi, Galia Benartzi, and CTO Yehuda Levi, alleging unregistered securities offerings related to Bancor’s June 12, 2017, initial coin offering (ICO) of BNT tokens, which raised ~$153 million. Zhang withdrew, and Timothy C. Holsworth was substituted as plaintiff on August 20, 2020, filing a 193-page second amended complaint (SAC) on September 11, 2020. Holsworth, from Wisconsin, alleged he purchased 587 BNT tokens on September 4, 2019, for $212.50 on COSS, a Singapore-based exchange, and claimed BNT was a security under the Securities Act of 1933. The SAC included 102 claims, with two federal claims under Sections 5 and 12(a)(1) (15 U.S.C. §§ 77e, 77l(a)(1)) for unregistered sales and control person liability, plus 100 state blue-sky claims, seeking rescission and class certification for BNT purchasers. On February 22, 2021, Judge Alvin K. Hellerstein dismissed the SAC on multiple grounds: (1) lack of standing, as Holsworth failed to allege selling BNT at a loss or any injury-in-fact; (2) lack of personal jurisdiction over defendants, as promotional activities in the U.S. (e.g., conferences, social media) were insufficient and not causally linked to Holsworth’s purchase; (3) failure to state a claim, due to no privity or solicitation between defendants and Holsworth, extraterritorial purchase (per Morrison v. National Australia Bank Ltd., 561 U.S. 247), and expiration of the one-year statute of limitations (15 U.S.C. § 77m); and (4) forum non conveniens, as New York was not a convenient forum compared to Israel or Switzerland. The court denied leave to amend and jurisdictional discovery, finding no basis for a “fishing expedition.” The case was terminated on February 22, 2021, with judgment for defendants. As of February 2021, BNT traded at ~$5.50, over 10 times Holsworth’s purchase price of ~$0.36 per token.