Crypto leaks risk Roche Freedman losing more class action lawsuits

An upstart litigation shop that has made a name for itself by taking on crypto firms is on the ropes and risks losing its status as a class action lawyer.

Roche Freedman is facing fallout after a website called Crypto Leaks released footage of founding partner Kyle Roche bragging about his relationship with blockchain startup Ava Labs and voicing an apparent strategy to target the company’s competitors.

The law firm has faced disqualification motions in at least five cases, four of which are class-action lawsuits brought by the firm, according to court documents. On October 13, a judge removed the firm as temporary lead counsel in a class action lawsuit accusing crypto exchanges Bitfinex and Tether of market manipulation.

Ava Labs, meanwhile, is moving away from using Roche Freedman as an outside adviser, said a company person familiar with the matter who spoke on condition of anonymity.

Disqualification is a tough remedy for courts to use because people generally “shouldn’t be denied a choice of lawyer,” said Jan Jacobowitz, a law professor at the University of Miami. “But that doesn’t mean it shouldn’t be applied to the right set of facts.”

Launched in 2019 by expatriates from Boies Schiller, Roche Freedman has been among the most active firms in the cryptocurrency litigation space. In addition to the Bitfinex/Tether market manipulation case, the firm represented plaintiffs in a case that resulted in a jury indicting self-proclaimed bitcoin inventor Craig Wright to pay $100 million in damages for defrauding a deceased friend over crypto-intellectual property.

The case has now been appealed in the eleventh circuit. Wright’s lawyer is among the parties pushing for the Roche Freedman law firm to be removed.

Crypto leaks

Roche has said the footage stems from meetings he had in London in January 2022 with what he initially thought were potential investors in a business venture. In an affidavit filed in court in September, he claimed that a defendant in an action the firm is opposing was behind a scheme to obtain compromising footage of him. He did not name the accused.

It is still unclear who is behind the website Crypto Leaks, which was launched this summer and has only published three posts. But the response to the admission of Roche has been swift.

District Judge Katherine Polk Failla said on Oct. 13, when she removed Roche Freedman from the Bitfinex/Tether case, “it is too easy to say that Mr. Roche was drunk and stupid.” She added: “His statements were coherent and logical and too detailed for me to dismiss out of hand.”

Failla also concluded that the class would not suffer any diminished quality in legal representation from the firm’s co-lead counsel – the law firms of Selendy Gay Elsberg and Schneider Wallace.

Roche denial

Roche and Ava Labs CEO Emin Gun Sirer have categorically denied allegations that they targeted competitors through litigation. Sirer has said that Roche made false statements about their relationship to impress potential business partners.

Roche Freedman responded to the footage by firing Roche from the class action practice and barring him from participating in or financially benefiting from ongoing class actions.

Still, opposing attorneys in at least five cases, including the entities behind the BitMEX cryptocurrency exchange and the TRON blockchain protocol, have pushed to remove the entire firm.

Even Roche Freedman’s co-lead counsel in the action against Bitfinex and Tether pushed for the firm’s dismissal on the grounds that it would eliminate a “sideshow”.

A partnership agreement drawn up in court in 2021 showed that Roche retained Ava Labs as a client in 2019 and that the blockchain developer agreed to distribute some of its Ava Labs tokens to partners in exchange for legal services.

Roche’s other named partner Devin “Velvel” Freedman has acknowledged that some of the firm’s lawyers own tokens issued by Ava Labs or stakes in the company. He has said that such involvement is not inappropriate and that the firm has never abused the legal system.

The law firm did not comment on Failla’s decision on October 13.