Digital Currency & Blockchain Quarterly Litigation Update

Welcome to Goodwin's Digital Currency & Blockchain Quarterly Litigation Update, in which our Chambers-ranked global team of specialists shares highlights and key litigation and enforcement updates that are shaping the industry, as well as relevant legislative updates. To receive future updates, please subscribe.

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In This Issue
While the US Securities and Exchange Commission (SEC)'s retreat in Q1 from several high-profile enforcement actions signaled a shift in its approach to digital assets, recent fraud actions in Q2 suggest a more targeted recalibration of enforcement priorities rather than a full-scale withdrawal. And although the SEC's case against Binance was dismissed and broader industry enforcement remains subdued, state regulators and private litigants continue to take more active roles.

This quarter has also seen substantial developments on the policy and legislative front. During Washington's recent Crypto Week — after passing through the Senate in June — the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, setting forth the first-ever federal framework for stablecoins, was approved by the House on July 17 and signed into law by President Trump the following day. The Digital Asset Market Clarity Act of 2025 (CLARITY Act), which clarifies the roles of the SEC and Commodity Futures Trading Commission in regulating digital assets, passed through the House and is currently under review by the Senate, along with the Anti–Central Bank Digital Currency (Anti‑CBDC) Surveillance State Act.

In this issue

1 SEC Continues Dismissal Trend of Notable Suits, Including Enforcement Suit Against Binance, but Signals a Renewed Focus on Fraud

2 Oregon Attorney General Rayfield Sues Coinbase for Promoting and Selling High-Risk Investments

3 Private Litigation Remains Active as Enforcement Wanes

4 Crypto Week Brings GENIUS CLARITY to the Industry

1 SEC Continues Dismissal Trend of Notable Suits, Including Enforcement Suit Against Binance, but Signals a Renewed Focus on Fraud

Enforcement Updates

Key Takeaway: The SEC's dismissal of its enforcement actions against Binance and Dragonchain, along with several other notable suits and settlements dismissed in Q1, signals a continued pullback from some of its most aggressive efforts to police the digital asset space. At the same time, it confirms a recalibration of the agency's broader enforcement strategy — shifting toward protecting investors by focusing on garden-variety fraud, in which blockchain technology or crypto assets are adjacent to, rather than driving or central to, the underlying allegations of misconduct.

SEC Dismisses Suit Against Binance
On May 29, 2025, the SEC filed a stipulation of dismissal with defendants Binance Holdings Limited, BAM Trading Services Inc., BAM Management US Holdings Inc., and Changpeng Zhao to dismiss, with prejudice, its lawsuit in the US District Court for the District of Columbia. The thrust of the allegations against the defendants was that crypto transactions, especially the secondary-market trades on the platform, constituted securities transactions, since virtually all digital assets on the exchanges are unregistered securities. In its press release, the SEC stated that "the Commission determined that the dismissal of this action is appropriate." In our "Digital Currency & Blockchain 2024 Year End Review," we provided an in-depth exploration of the motions to dismiss the SEC's amended complaint against Binance. Though the motions were fully briefed by the parties, they will not ultimately be decided by the court given the stipulation of dismissal.

SEC Dismisses Suit Against Dragonchain
On April 24, 2025, the SEC filed a stipulation of dismissal with defendants Dragonchain, Inc., Dragonchain Foundation, The Dragon Company, and the entities' principal John Joseph Roets, voluntarily dismissing with prejudice its long-running enforcement action in the US District Court for the Western District of Washington. The SEC originally alleged that Dragonchain raised approximately $16.5 million through unregistered offerings of Dragon (aka DRGN) tokens, which the agency contended were securities.

The case had proceeded all the way through fact discovery and dispositive motions in anticipation of a January 2025 trial date. Beginning in December 2024, however, the parties requested a series of stays from the court, most recently through April 28, 2025. A few days before the latest stay expired, the SEC filed the stipulation of dismissal. In the stipulation, the SEC cited the creation of the crypto task force and the SEC's ability to "exercise . . . its discretion . . . as a policy matter" as reasons "the Commission believes the dismissal of [this] case is appropriate."

SEC Secures Judgment Against UAE-Based Market Maker CLS Global
On April 7, 2025, the US District Court for the District of Massachusetts entered final judgment against CLS Global FZC LLC, an entity based in the United Arab Emirates (UAE) that labeled itself a crypto asset market maker. The SEC alleged that CLS Global engineered a market-manipulation scheme targeting the NexFundAI token (which the SEC contended was a security) by wash trading and engaging in other deceptive trading practices to artificially inflate trading activity and mislead retail investors. CLS Global consented to the final judgment, which enjoins violations of Sections 17(a)(1) and (3) of the Securities Act of 1933 and Sections 10(b) and 9(a)(2) and Rule 10b‑5 under the Securities and Exchange Act of 1934. The judgment also imposes a $425,000 civil penalty, orders disgorgement of $3,000 with prejudgment interest, and mandates that CLS Global cease all business with US persons or entities and implement rigorous client-screening, compliance policies, and annual certifications for three years.

The SEC's action followed a parallel criminal case brought by the US Attorney's Office for the District of Massachusetts, in which CLS Global pleaded guilty to conspiracy to commit market manipulation and wire fraud as part of a decades‑long wash trading operation, which involved the FBI's deployment of NexFundAI tokens as "trap tokens" to expose the scheme. As part of the criminal resolution, CLS Global admitted that it agreed to provide market-making services for the NexFundAI token, including engaging in wash trading to create the appearance of market activity and attract investors.

SEC Pursues New Fraud Action Against Unicoin and Senior Executives
On May 20, 2025, the SEC filed charges against Unicoin Inc. and four of its senior executives (its CEO, former president, former chief investment officer, and general counsel) in the US District Court for the Southern District of New York for orchestrating a $100 million securities offering fraud. The SEC alleges that Unicoin misled more than 5,000 investors into purchasing "rights certificates" by promoting them as asset-backed, SEC-registered investments in next-generation crypto tokens, despite its assets being worth only a fraction of what was claimed and the offerings being unregistered. The complaint also charges Unicoin and its CEO, Alex Konanykhin, with conducting unregistered offerings and selling securities to ineligible investors, while Unicoin General Counsel Richard Devlin, who consented to a settlement, was charged with negligently making misstatements in offering documents. The SEC seeks injunctive relief, penalties, and officer-and-director bars against the individual defendants, with litigation ongoing for all but Devlin.

SEC Pursues New Fraud Action Against Zero Edge Founder
On May 7, 2025, the SEC charged Richard T. Kim, founder and former CEO of Zero Edge Corporation, with fraud for misappropriating approximately $3.7 million in investor funds that were intended to support the development of a blockchain-based online casino platform. According to the SEC, Kim raised approximately $5 million in a seed round between March and June 2024 and, within minutes of receiving the first investment, began diverting funds to personal crypto trading and gambling accounts. The complaint alleges that Kim lost nearly all of the investors' funds through high-risk futures trading and online gambling and that the Zero Edge platform never launched. The SEC's suit, filed in the US District Court for the Southern District of New York, seeks injunctive relief, disgorgement, civil penalties, and an officer-and-director bar.

On April 13, 2025, in a parallel criminal action, the US Attorney's Office for the Southern District of New York unsealed charges of one count of wire fraud and one count of securities fraud against Kim arising out of the same conduct set forth in the SEC's complaint.

SEC Charges PGI Global Founder With $198 Million Crypto Asset and Foreign Exchange Fraud Scheme
On April 22, 2025, the SEC charged Ramil Ventura Palafox, founder of PGI Global, for orchestrating a $198 million fraudulent investment scheme involving unregistered securities offerings marketed as crypto asset and foreign exchange trading "membership" packages. According to the SEC, from 2020 to 2021, Palafox falsely promised investors guaranteed high returns and referral incentives, while misappropriating over $57 million for personal use — including luxury vehicles and high-end retail purchases — and using the remainder to make alleged Ponzi scheme–like payouts to earlier investors. The SEC's complaint, filed in the US District Court for the Eastern District of Virginia, seeks injunctive relief, civil penalties, disgorgement, and conduct-based bans, and names four relief defendants who allegedly received ill-gotten gains.

Earlier this year, Palafox was also arraigned on related criminal charges brought by the US Attorney's Office for the Eastern District of Virginia. According to a joint status report filed in June, the parties are currently in plea negotiations. The court scheduled a status conference for August 12, 2025, at which time the parties are expected to provide a timeline for a change of plea hearing or trial date.

2 Oregon Attorney General Rayfield Sues Coinbase for Promoting and Selling High-Risk Investments

Key Takeaway: Oregon's attorney general brought a lawsuit against Coinbase under Oregon's securities laws following the SEC's dismissal of its action against Coinbase in federal court. Oregon's attorney general says that "states must fill the enforcement vacuum being left by federal regulators."

Oregon Attorney General Dan Rayfield filed a lawsuit against Coinbase on April 18, 2025, alleging Coinbase violated Oregon securities laws by encouraging the sale of unregistered cryptocurrencies to people in Oregon. In his press release about the lawsuit, Attorney General Rayfield claims that Coinbase "reaped millions of dollars in fees as Oregonians have faced huge losses, often devastating, from risky investments in a market that's stacked against them and hard to navigate." The Oregon action follows the SEC's dismissal of its similar case against Coinbase. The complaint names 31 tokens alleged to have violated the securities laws — a much longer list than the 13 tokens named in the SEC's now-dismissed complaint against Coinbase. In addressing his office's decision to file suit, "Attorney General Rayfield says the states must fill the enforcement vacuum being left by federal regulators who are giving up under the new administration and abandoning these important cases." The case is now pending in the US District Court for the District of Oregon after Coinbase removed the case on June 2, 2025. The federal judge granted Coinbase's motion to extend its time to respond to the complaint until August 1, 2025, over Oregon's objection.

3 Private Litigation Remains Active as Enforcement Wanes

Litigation Updates

Key Takeaway: Even as the SEC retreats from high-profile enforcement, plaintiffs' firms are pressing forward to bring private actions. This trend underscores that regulatory inaction at the federal level should not be mistaken for legal insulation.

As we anticipated in our update last quarter, plaintiff-side firms continue their efforts to fill a perceived enforcement gap by launching their own investigations and litigation against companies in the Web3 space.

Private Plaintiffs Target Meme Coin Issuers With Theories of Securities Law Violations and Consumer Harm
Private plaintiffs are commencing investigations of recently issued digital assets that have experienced drops in market value, looking for evidence of misstatements or alleged market manipulation that could support theories of liability under the securities laws or state consumer protection laws. Given the proliferation of meme coins over the past several months — including in connection with the current administration — this class of digital assets has emerged as a prime target for scrutiny from the plaintiffs' bar.

In particular, on March 17, 2025, in the wake of the public press regarding the $LIBRA meme coin, a private plaintiff commenced litigation against the issuer of $LIBRA; the venture firm that allegedly facilitated the launch of $LIBRA; the venture firm's principals; the decentralized set of smart contracts that was used to launch $LIBRA; and a developer of the smart contracts who allegedly provided technical support to the issuer. The complaint brings claims for negligent misrepresentation, unjust enrichment, and violations of New York's state unfair, deceptive, or abusive acts or practices (UDAP) statute. On April 19, 2025, the same law firm commenced a separate action against largely overlapping parties, bringing claims under the federal securities laws, as well as claims for negligent misrepresentation, fraud, unjust enrichment, and violations of New York's state UDAP statute, in connection with the launch of the $M3M3 meme coin on December 6, 2024. Both complaints scrutinize public statements and tracing analysis of trading activity on the blockchain in their attempt to establish evidence of market manipulation and consumer harm. Each case is before Judge Jennifer Rochon in the US District Court for the Southern District of New York, and each action's briefing on motions to dismiss is anticipated to proceed in Fall 2025.

These private actions concerning meme coins come in the wake of the SEC's Division of Corporation Finance's February 27, 2025, "Staff Statement on Meme Coins," which shares the staff's view that "[m]eme coins typically are purchased for entertainment, social interaction, and cultural purposes"; "their value is driven primarily by market demand and speculation"; and, as a result, they "tend to experience significant market price volatility." The statement concludes that "transactions in the types of meme coins described in this statement, do not involve the offer and sale of securities under the federal securities laws." As it stands now, the statement reflects the view of the staff of the Division of Corporation Finance, is guidance only, and does not have legal force or effect in the courts. The pending meme coin litigations could provide an early indication of how the courts will take this statement and other staff statements into account in developing jurisprudence in the digital asset space going forward.

Heightened Scrutiny of Public Statements Will Continue as More Web3 Companies Go Public
With more companies in the digital asset space going public, we also anticipate an uptick in private litigation focused on digital asset disclosures and related market conduct. Private plaintiffs are likely to scrutinize public communications — both formal statements and informal channels like social media — for potential material misstatements. Private plaintiffs will also seek to monitor on-chain data for evidence of potential insider trading or market manipulation, particularly surrounding events that significantly impact the market price of digital assets that, in turn, may affect the price of publicly traded stock for companies holding digital assets on their balance sheet. And notably, even as the SEC retreats from non-fraud enforcement actions, the district courts' Howey analyses in the legacy Gary Gensler–era litigations remain persuasive authority for plaintiffs attempting to extend securities laws to token sales. That being said, the defense bar may similarly use other precedents to combat these private actions, including favorable aspects of district court decisions like in Ripple and others. Given this evolving litigation landscape, digital asset companies should maintain strong market integrity policies, remain vigilant to ensure the accuracy of all public-facing communications, and educate employees on the risks of trading on material nonpublic information.

4 Crypto Week Brings GENIUS CLARITY to the Industry

Policy and Legislative Updates

Key Takeaway: Crypto Week in Washington, DC, (July 14 to 18, 2025) showcased growing bipartisan interest in establishing clear regulatory frameworks for digital assets, culminating in significant legislative movement on two major bills. The Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which seeks to create the first federal regulatory framework specifically for stablecoins, passed in the Senate and the House with bipartisan support, and was signed into law by President Trump on July 18, 2025. The act reflects a coordinated push by Congress and the White House to bring greater clarity and stability to the cryptocurrency industry. The GENIUS Act provides guidance on topics such as payment stablecoin issuance, custody, disclosure, and audit requirements and establishes regulatory oversight for issuers, creating stability in the marketplace. Meanwhile, the House passed the Digital Asset Market Clarity Act of 2025 (CLARITY Act), which seeks to create a detailed regulatory framework for certain digital assets, including by outlining the requirements for offers and sales of certain digital assets and delineating the boundaries of oversight between the SEC and the CFTC. As of this writing, the Senate has not yet introduced a companion bill to the CLARITY Act, but discussions remain ongoing, and the momentum from Crypto Week suggests continued legislative focus in the months ahead.

GENIUS Act Passes in Senate and House, Becomes Law
As detailed in a June 24, 2025 Goodwin alert, the GENIUS Act passed in the Senate on June 17, 2025, with bipartisan support. The House passed the act on July 17, 2025, again with bipartisan support, and President Trump signed it into law the following day. The act establishes the first federal regulatory framework for "payment stablecoins" (i.e., digital assets that are used as a means of payment or settlement and whose issuer is obligated to convert, redeem, or repurchase for a fixed amount of monetary value and maintain a stable value relative to a fixed monetary value). The act also limits stablecoin issuance to select entities, including federally regulated banks, specially chartered non-bank entities approved for issuance by the Office of the Comptroller of the Currency (OCC), and certain state-approved issuers. Issuers must maintain one-to-one reserves in high-quality liquid assets (e.g., US dollars, treasuries), subject to strict custody, disclosure, and audit requirements. Monthly certifications by executives and independent attestations by public accounting firms will be required for issuers, with more stringent reporting for non-public issuers with outstanding issuance above $50 billion. The legislation expressly excludes payment stablecoins from being treated as securities.

The GENIUS Act also establishes a federal oversight regime. The OCC, the Federal Deposit Insurance Company, the Board of Governors of the Federal Reserve System, or the National Credit Union Administration would be tasked with trying to avoid duplication of examination activities by using existing reports and other supervisory information. State regulators would have similar examination authority over state-qualified payment stablecoin issuers. Regulatory enforcement tools include license revocation, civil penalties, and executive removal. Issuers must also comply with anti–money laundering, sanctions, and consumer protection laws, and are prohibited from misleading the public about government backing or legal tender status. In a decided shift from the current landscape, the GENIUS Act creates a stringent, centralized framework likely to reshape the stablecoin ecosystem and constrain decentralized issuance models.

House Passes CLARITY Act
On July 17, 2025, the House passed the CLARITY Act, a new regulatory framework for digital assets, which introduces the concept of a "digital commodity" and carves its regulation out from traditional securities laws under certain circumstances. The bill, as passed, expands upon the discussion draft released in May (more fully discussed in Goodwin's recent crypto regulation update). The bill seeks to more clearly define jurisdictional authority between the CFTC and SEC for regulation of digital assets. It pushes spot commodity regulation to the CFTC while leaving securities regulation under the SEC's purview. The bill's significant expansion of the CFTC's jurisdiction to include spot trading of digital commodities — an area previously unregulated at the federal level — is notable.

The bill's definition of "investment contract assets" sharpens the distinction between the CFTC's and the SEC's jurisdictions. In the proposal, "investment contract assets" are defined as a category of "digital commodities" that does not overlap with traditional "investment contracts" under Howey. These investment contract assets can be "exclusively possessed and transferred, person-to-person, without necessary reliance on an intermediary, and is recorded on a blockchain," and "sold or otherwise transferred, or intended to be sold or otherwise transferred, pursuant to an investment contract." The bill also mandates coordination between the SEC and CFTC in regulation. While much remains subject to future rulemaking, the bill signals a notable shift toward a dual-agency, disclosure-driven regime that integrates digital assets into the broader US financial system with clearer, more scalable rules.

Although the Senate has not yet introduced a companion bill to the CLARITY Act, the Senate Committee on Banking, Housing, and Urban Affairs is actively exploring similar legislation. In June, four Republican senators, including Senate Banking Chair Tim Scott, released a set of guiding principles "for the development of comprehensive market structure legislation." While these efforts are ongoing, the momentum generated during Crypto Week suggests a continued legislative focus in the months ahead.

Check Out Goodwin's Latest Industry Insights

Upcoming Event: Goodwin's Fintech Forum in Boston (September 18, 2025)
Join Goodwin in Boston for our Fintech Forum — a premier gathering of fintech companies, financial institutions, and investors. Held during Boston Fintech Week, this in-person event will provide an opportunity to connect with industry leaders and explore the latest innovations and regulatory shifts shaping the future of financial services. The program will include discussion of fintech regulatory updates, the role of stablecoins in the future of payments, and a look at how AI is driving innovation across financial services and fintech. A networking reception will follow the program. For more information, reach out to Events@Goodwinlaw.com.

Recent Client Alert: "Federal Stablecoin Legislation Poised to Implement Comprehensive Regulatory Framework for Payment Stablecoins"
On July 18, 2025, President Trump signed the GENIUS Act into law. The statute creates, for the first time, a comprehensive regulatory regime governing the issuance of payment stablecoins in the United States and providing for the regulation and supervision of payment stablecoin issuers. To learn more, read Goodwin's recent alert on the GENIUS Act.

Recent Audio Insight: "Crypto Regulatory Framework Begins to Take Shape in Congress"
The discussion draft of a new crypto market infrastructure bill proposes a new regulatory framework based on shared jurisdiction between the CFTC and SEC, expanded CFTC authority, and new SEC exemptions for token sales and distributions. Listen to the audio insight or read more about the new bill draft.

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