Plaintiffs Fight Blockchain Co.’s Arbitration Bid

On Monday, the plaintiffs in Crowl et al v. Strongblock et al filed an opposition to the crypto platform defendants’ motion to dismiss and compel arbitration.

The plaintiffs’ complaint states that StrongBlock is an unincorporated general partnership operating in the United States that sells digital assets called tokens and nodes. Further, it states that StrongBlock purported to be a “Blockchain Revolution” because it was the first working platform that incentivized the purchase of nodes which store, distribute and maintain blockchain data and are vital to a blockchain’s infrastructure.

StrongBlock allegedly advertised the nodes as an opportunity to participate in, and profit from, its blockchain infrastructure and guaranteed lifetime uncapped rewards in StrongBlock tokens. Further, the plaintiffs state that they purchased StrongBlock nodes under the promise that they would provide uncapped daily crypto token rewards in perpetuity. 

However, the complaint states that in April 2022, StrongBlock “arbitrarily and unilaterally” capped the cumulative rewards that could be generated off of a node. The plaintiffs argue that StrongBlock and its partners misrepresented the nodes and filed the present lawsuit alleging violations of the Securities Act, including the unregistered offer and sale of securities, breach of contract, fraud and conversion among others and are seeking over $4.1 million in damages. 

On October 14, 2022, the defendants filed a motion to dismiss arguing that the plaintiffs agreed to a binding arbitration agreement contained in the StrongBlock and node terms of service. The plaintiffs responded by filing the opposition at issue requesting the court to deny the motion to dismiss and compel arbitration arguing that they did not have notice nor assented to the arbitration agreement. 

Specifically, the plaintiffs contend that the terms of service were never presented to them and StrongBlock only provided a dark blue link behind a black background at the very bottom of the node purchase. Further, the plaintiffs argue that the arbitration agreement is unenforceable due its choice of law clause requiring the application of the internal laws of the Cayman Islands as it would prevent effective vindication of their U.S. Securities Act Claims. 

The plaintiffs are represented by Government Law Group, PLLC and ZEISLER PLLC, and StrongBlock and its partners are represented by Lathrop GPM.