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District Court Holds Securities Act Claims Are Time-Barred Based on Date Crypto Assets Are First “Offered,” Not Distributed
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People
April 14, 2025 Download PDF
On March 25, 2025, a California district court granted a motion to dismiss a class action lawsuit asserting claims brought against a crypto-issuer under the Securities Act, ruling that the claims were time-barred by the three-year statute of repose. The decision clarifies that a crypto asset is considered to be “offered,” for purposes of the statute of repose, when an issuer first solicits purchasers, even if there is a significant delay before the crypto asset is distributed to investors.
Background
Dfinity USA Research LLC (“Dfinity”) was engaged in the development of a blockchain-based, decentralized version of the internet known as the “Internet Computer.” In February 2017, Dfinity held an initial crowdsale of ICP, a crypto asset and the native utility token of the Internet Computer, to raise donations for the network’s development. Although ICP tokens did not yet exist, participating “donors” were promised future ICP tokens proportional to their ”donations.” In May 2021, more than four years later, Dfinity held an initial coin offering and distributed ICP tokens to donors who had participated in the February 2017 crowdsale.
Following a substantial decline in the value of ICP shortly after the initial coin offering, a putative class of ICP purchasers filed a lawsuit against the crypto-issuer. Among other claims, plaintiffs alleged that Dfinity unlawfully offered to sell securities without a registration statement, in violation of Sections 5 and 12(a)(1) of the Securities Act. Dfinity moved to dismiss and argued, among other things, that the Securities Act claims were time-barred by the three-year statute of repose.
The District Court’s Decision
The district court granted defendants’ motion to dismiss and held that the three-year repose period begins when the crypto asset is “first bona fide offered.” Although plaintiffs argued that no ICP tokens were issued, sold or made available for trading until the initial coin offering in May 2021—less than three years before the class action was filed—the court emphasized that bona fide offers require only “clear objective attempts to secure purchasers” and do not require an actual transfer of ownership. The court therefore reasoned that the repose clock began during the initial crowdsale in February 2017, more than three years before the lawsuit was filed—even though this occurred several years before the token was distributed and plaintiffs suffered investment losses.
Note that, although defendants indicated their intent to “vigorously contest” that the crypto assets at issue (ICP tokens) were securities, that issue was preserved for a later stage of litigation and the court had no occasion to consider or determine whether ICP tokens were securities in granting the motion to dismiss.
Implications
The decision clarifies that, for purposes of the Securities Act’s statute of repose, an offer occurs at an issuer’s first bona fide attempt to secure purchasers, even if significant time elapses before ownership is actually transferred. This may provide particular comfort for issuers of crypto assets, who sometimes experience years-long intervals between a first fundraising round and the minting and first distribution of an associated crypto asset. Under the reasoning of this opinion, Securities Act claims arising from such offers are time-barred three years after the initial solicitation of investors, even if the investors do not receive the assets or suffer financial harm until a later date.
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