A rising tide lifts all boats, and the last week of rising prices in crypto seems to be doing just that\u2014even lifting Nano, a boat once thought sunk.<\/p>\n
Previously known as \u201cRaiBlocks\u201d and traded as XRB, Nano has gone through an intensive rebranding. Now listed as simply NANO on most exchanges, the coin is threatening a comeback, up more than 17 percent in the last 24 hours and approaching nearly $2 per coin<\/a> for the first time since October 2018\u2014when the first <\/em> class-action lawsuit against Nano was dismissed.<\/p>\n For more than a year, the team behind Nano\u2014an altcoin formerly ranked in the top 20 of all cryptocurrencies and worth $30 per coin\u2014has faced the possibility of a $170 million lawsuit, which if upheld in court, would be the largest award in the short but highly litigious history of crypto.<\/p>\n The latest class-action suit, filed earlier this year, is now the second attempt by Nano investors to seek a court-ordered \u201crescue fork\u201d of Nano\u2019s blockchain, which plaintiffs believe could be used to restore the $170 million worth of XRB that was lost in the February 2018 \u201chack\u201d of Italian crypto exchange BitGrail<\/a>.<\/p>\n The lawsuit, however, could ultimately come down to the same question that continues to torment the hundreds of crypto startups that raised money in ICOs or similar token sales: Is this coin a security, or not?<\/p>\n Last week, attorneys for Nano who are seeking to dismiss the lawsuit, filed a 39-page memorandum in a U.S. district court laying out the case for why XRB isn\u2019t a security\u2014and why Nano can\u2019t be held liable for losses incurred by XRB purchasers.<\/p>\n Fat chance, says David Silver, the securities fraud and investment loss attorney who represents the plaintiffs in the Nano suit. \u201cOur complaint against them is rock solid,\u201d he says. Representatives for Nano did not immediately respond to Decrypt\u2019s request for comment.<\/p>\n Nano is still down by nearly 95 percent<\/a> from its all-time high\u2014its precipitous decline preceded by the BitGrail \u201chack\u201d that saw more than 15 million XRB (worth approximately $170 million at the time) disappear from the exchange without a trace. The legitimacy of the alleged hack was immediately brought into question by those affected, including Nano developers themselves<\/a>.<\/p>\n And that\u2019s when the problems began.<\/p>\n Following the mysterious disappearance of XRB from BitGrail, a Nano investor, Alex Brola, filed a class-action lawsuit<\/a> in April 2018 alleging, among other things, a conspiracy between Nano\u2019s core team and BitGrail\u2019s CEO and founder Francesco \u201cThe Bomber\u201d Firano<\/a> to \u201cscheme and lure investors into purchasing XRB and storing those assets at BitGrail.\u201d<\/p>\n Brola\u2019s lawsuit, filed in New York, was withdrawn last October after reaching a confidential settlement agreement with Nano, says Silver. The lawsuit was dismissed by the court following the withdrawal, and an attorney for Nano reportedly told<\/a> legal journal Law360 that \u201cthe plaintiff withdrew the complaint because the case lacked merit.\u201d But Nano\u2019s troubles didn\u2019t end there.<\/p>\n Silver filed a second class-action lawsuit in January, this time in a California court and on behalf of James Fabian, adding BitGrail and Firano as defendants along with Nano and its core team, including CEO and founder Colin LeMahieu<\/a>.<\/p>\n The new lawsuit mirrors the initial complaint and alleges that Nano offered and sold \u201cunregistered securities\u201d and that Nano and BitGrail worked in tandem to defraud investors, and provides additional evidence of the purported \u201ccivil conspiracy.\u201d<\/p>\n The lawsuit claims Nano \u201cdirected the investing public to purchase XRB through BitGrail by providing specific investment instructions and assurances that the cryptocurrency exchange was secure and could be trusted to safeguard investment assets.\u201d The complaint cites various social media posts from Nano to make its case, including tweets from former Nano core team member Zack Shapiro<\/a>which intimated he spoke to BitGrail\u2019s CEO \u201cevery day\u201d and reassured purchasers that XRB \u201cfunds are safe on BitGrail.\u201d<\/p>\n Prior to the supposed hack, XRB accounted for more than 80 percent of BitGrail\u2019s trading volume, according to the lawsuit.<\/p>\n Both BitGrail\u2019s Firano and the Nano executives named in the lawsuit deny there was any collusion\u2014with each side casting blame on the other for the missing XRB.<\/p>\n Nano publicly challenged<\/a> Firano\u2019s story of a hack and suggested BitGrail\u2019s own mismanagement<\/a> of customer funds led to the XRB\u2019s disappearance. Firano fired back by claiming LeMahieu had \u201cdirect access\u201d to BitGrail\u2019s database and servers and that the \u201cNano team was relentless in directing users to the BitGrail exchange\u201d despite warning them of \u201cmajor issues\u201d with both Nano\u2019s protocol and the exchange, according to the complaint.<\/p>\n Either way, Silver says the matter should be resolved by compelling Nano to create a \u201crescue fork\u201d\u2014essentially forcing the company to write off its original coin, fork its code, and create a new cryptocurrency in a way that would repay everyone who lost money in the alleged hack.<\/p>\n Otherwise, Nano developers are the ones who ultimately profit from the \u201chack,\u201d he says.<\/p>\n While the lawsuit makes various state and common law claims against Nano, including the allegations of fraud and civil conspiracy, it largely hinges on the federal claim that Nano violated U.S. securities laws and that investors are therefore owed \u201crescissory, compensatory, punitive and injunctive relief.\u201d<\/p>\n XRB is not registered as a security with the SEC, nor did Nano file for an exemption. In its motion to dismiss, however, Nano insists none of that matters. Nano claims XRB is a decentralized cryptocurrency, like Bitcoin, which the SEC has said it doesn\u2019t consider a security.<\/p>\n \u201cNano Coins are a cryptocurrency distributed for free and their value is derived from their utility as a currency, rather than from the success of any business operated by their developers,\u201d reads the memorandum filed with the court.<\/p>\n \u201cNano claims to be like bitcoin,\u201d says Silver, \u201cexcept the creators of Nano wanted to get rich and famous.\u201d<\/p>\n While XRB was initially distributed for free via a captcha-based faucet distribution system<\/a>\u2014a process similar to an airdrop\u2014Silver says this doesn\u2019t mean it gets past the Howey Test or federal securities laws. \u201cGiving it away for free does not mean it\u2019s not a security,\u201d he says, adding that the latest SEC guidance<\/a> with respect to the sale and distribution of digital assets<\/a> reiterates this fact.<\/p>\n The lawsuit claims Nano wields \u201cabsolute control over essentially every aspect of XRB and its value\u201d and used the faucet system during its original distribution to manipulate its price on exchanges\u2014turning the Nano faucet on or off to affect \u201csell pressure.\u201d<\/p>\n To this day, Nano developers hold most of the XRB, Silver claims.<\/p>\n \u201cCrypto law is being made on a daily basis in litigation, but I\u2019m personally a believer that the law hasn\u2019t changed since the 1930s,\u201d he says, adding that the SEC<\/a> and recent court cases<\/a> support his view. \u201cIn most cases, securities laws apply. Period.\u201d<\/p>\n Silver says he plans to file an opposition to Nano\u2019s motion to dismiss within 30 days but doesn\u2019t expect a resolution from the court until winter.<\/p>\n Just another day in crypto, as Silver likes to say.<\/p>\n Read the Full Article:<\/p>\nThe Trials of Nano<\/h3>\n
Is Nano a security?<\/h3>\n