Hodges v. Harrison, 372 F. Supp. 3d 1342 (S.D. Fla. 2019)

On February 8, 2019, the U.S. District Court for the Southern District of Florida granted in part and denied in part the plaintiffs’ motion for summary judgment dismissing a putative class action complaint alleging (among other things) that Monkey Capital, LLC and Monkey Capital Inc. (collectively “Monkey Capital”) violated Sections 12(a) and 15 of the Securities Act and Section 517.07 of the Florida Securities and Investor Protection Act by selling unregistered securities.

In advance of an ICO scheduled for July 2017, defendants sought out investors to purchase tokens called “Monkey Coin” and “Coeval” in a pre-ICO offering to raise capital for Monkey Capital, which allegedly was supposed to create a private cryptocurrency exchange and decentralized hedge fund. The ICO never took place and the status of Monkey Capital and its projects were unknown at the time of the complaint.

The plaintiffs moved for summary judgment that (among other things) Monkey Coin and Coeval were securities under the federal and state securities laws. Applying the test set forth in SEC v. W.J. Howey Co., the court granted the plaintiffs’ motion because (1) the plaintiffs invested cryptocurrencies to purchase Monkey Coin and Coeval; (2) the plaintiffs’ funds were pooled by the defendants such that all investors shared in the risks and benefits of Monkey Coin and Coeval; and (3) the success of Monkey Coin and Coeval depended entirely on the defendants’ efforts in developing Monkey Capital’s projects.