Plaintiffs fight Blockchain Co.’s arbitration bid

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

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

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

However, the complaint states that in April 2022, StrongBlock “arbitrarily and unilaterally” limited the cumulative rewards that could be generated from a node. The plaintiffs allege that StrongBlock and its partners misrepresented the nodes and filed the current lawsuit alleging violations of securities laws, including the unregistered offer and sale of securities, breach of contract, fraud and conversion, among other things, 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. The plaintiffs responded by filing the relevant opposition and asked the court to deny the motion to dismiss and compel arbitration, arguing that they had no notice or consent to the arbitration agreement.

In particular, the plaintiffs claim 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, plaintiffs argue that the arbitration agreement is unenforceable because of its choice-of-law clause requiring the application of the internal laws of the Cayman Islands, as it would prevent effective vindication of their US securities law claims.

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