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The weird world of crypto litigation – Cointelegraph Magazine

Get your money back The weird world of crypto litigation

Want to sue a crypto project that ripped you off? That will be $1 million, thank you. Luckily, there are options for those who face the daunting prospect of spending a small yacht’s worth of money in lawyer fees for their chance at crypto justice.

In practice, the majority of victims of international blockchain scams find themselves with little hope of recovering their money. According to crypto law expert Jason Corbett, a normal court case to recover $10 million–$20 million dollars in the blockchain sector can easily cost between $600,000 and $1 million, with an average timeline of 2.5 years.

But there are a range of cheaper and better options to get a successful outcome — if you learn how to work with the system. Legal investment funds can finance your case for a share of the judgement — sort of like a VC firm for lawsuits.

“The vast majority of lawsuits — up to 95% — are privately settled before they go to court,” Corbett says.

Common blockchain disputes

Corbett has six years of experience in crypto law as a managing partner of international blockchain-specialized boutique law firm Silk Legal. Speaking with Magazine about his new crypto litigation financing project Nemesis, Corbett notes a clear “increase in disputes stemming from deals gone wrong, contractual breaches and bad actors over the past months” due to the bear market, which has seen many projects go sideways.

There are a variety of common disputes involving blockchain, from misuse of funds to smart contract failures, which are listed below.

Misuse of investment proceeds happens when “fundraising proceeds go to founders’ Lambos and villas” instead of legitimate business needs, he explains. While the occasional boat party networking or team-building event might be justifiable, salary packages are the main permissible routes by which invested capital can flow to the founders — even dividends can only be paid from profit, not incoming investments.

The sale of fraudulent crypto happens when a token is sold to investors based on false claims. A possible (though not tested in court) example is found with the automated market maker protocol SudoRare, which suddenly shut down and disappeared with investors’ money. Such cases can easily cross the threshold into criminal territory, according to Corbett. However, he admits that pursuing the culprits can be very difficult unless the scammers have been reliably…

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