Landmark jury verdict concludes digital asset products linked to cryptocurrency mining are not securities



United States: Landmark Jury Verdict Concludes Digital Asset Products Related to Cryptocurrency Mining Are Not Securities

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On November 2, a Connecticut jury found that a series of digital asset products linked to a cryptocurrency mining operation did not count as securities. The historic jury verdict is among the first to decide whether cryptocurrency assets and products qualify as securities.

The case presented the new question of whether the digital assets of GAW Miners LLC, a virtual mining company, were considered investment contracts. The company originally sold physical mining equipment, but began offering a series of digital assets to its customers. These assets included “hashlets” or portions of the computational power believed to be owned by the company, “hashpoints”, which could be converted into GAW’s “Paycoin” currency, and “Hashtakers” to store Paycoin.

In a class action lawsuit, customers said those digital assets were unregistered securities sold to defraud customers because GAW did not have the physical equipment they claimed to be selling. Ultimately, the jury found the products were not unregistered securities, despite the SEC’s findings to the contrary in related action.

This item more details on the case.

Winston & Strawn Law Clerk Dhruva Krishna also contributed to this blog post.

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