Crypto litigation: How to get your money back

Do you want to sue a cryptocurrency project for ripping off you? Thank you. There are alternatives for those who don’t want to spend a lot of money on legal fees in order to get their chance at crypto justice.

Most victims of international cryptocurrency scams are unable to recover their money. Jason Corbett, crypto law expert, says that a typical court case to recover $10-$20 millions dollars in the blockchain sector costs between $600,000.000 and $1,000,000, with an average timeframe of 2.5 years.

There are many cheaper options that can help you achieve a positive outcome. If you know how to use the system, there are also better options. You can get a portion of the judgment from legal investment funds, which is similar to a VC firm for lawsuits.

Corbett states that the vast majority of lawsuits, up to 95%, are settled privately before going to court.

Common blockchain disputes

Corbett has six years of experience in crypto law as a managing partner of international blockchain-specialized boutique law firm Silk Legal. Corbett spoke to Magazine about Nemesis, his crypto litigation financing project. He noted a clear increase in disputes due to deals gone wrong, contractual violations and bad actors over recent months. This is due to the bear markets, which has seen many projects fail.

Common disputes surrounding blockchain include misuse of funds and smart contract failures. These are all listed below.

He explains that “fundraising proceeds are misused when they go to founders’ Lambos or villas” rather than legitimate business needs. Although a boat party or team building event may be acceptable, salary packages are the only way that invested capital can be channeled to founders. Dividends cannot be paid from incoming investments.

When a token is purchased by investors on the basis of false claims, it’s known as fraudulent crypto. An example of this is SudoRare, an automated market maker protocol. Investors’ money disappeared and the protocol abruptly shut down. Corbett says such cases could easily be considered criminal. He admits, however, that it can be difficult to pursue the perpetrators unless they have been identified reliably.

Illegal securities offerings. Investors in flopped tokens may try to recover their money by claiming securities fraud. This is a way for them to prove that the offering was illegal. There are several U.S.-based lawsuits against U.S. projects, such as the ones against Bitconnect or Solana. Corbett explained that these claims are covered by securities law. They are civil claims and not those brought by the SEC, which classifies projects like Ripple securities.

Difficult organisations to sue.

Even disputes over smart contracts can end up in court. Corbett states that if two parties agree to follow a trigger on a smart contractual, and it malfunctions, this can place a lot on the coder, or smart contract audit company. Audit firms’ insurance policies are crucial in such situations.

Blockchain companies could be in trouble with many areas of law. Source: Nemesis

It is easy to see NFTs in which copyrighted images have been minted and then sold without permission when it comes to IP infringement. However, code can also be protected by patents or copyright. In this case, implementing code from other projects or forking tokens could result in serious claims. This is not the case for open-source software. That is why Uniswap code has been so frequently forked. )

High prices

Irena Heaver is a Dubai-based lawyer who specializes in blockchain. She explains that the aggrieved party pays for civil lawsuits. However, the state pursues criminal cases. Criminal cases are more serious than simple torts or “mistakes” and can lead to prison rather than monetary judgments.

A criminal conviction is only possible if all reasonable doubt has been removed. However, a civil judgment can be made on the basis of a balance, which means that one party is more likely to be convicted than another. The state decides whether or not to pursue criminal charges. This is rare when the accused thieves are located far away.

What can you do if the state won’t fund it?

Mediation or arbitration can be used to resolve disputes and is cheaper than traditional courtroom proceedings. Heaver says that while arbitration can be considered a binding process and can be seen as “court lite”, mediation is a private, lower-cost process where a third party assists the parties to reach a mutual understanding. She says that mediation is always recommended. She has helped to mediate dozens of disputes involving crypto.

Sometimes conflicts can be amicably settled through cost-effective mediation. Source: Pexels

Heaver stresses that a case must be brought to court. This is especially important for complex questions regarding newfangled monkey-DeFi derivative crypto-chain utility tokens.

This means that judges rely on expert witness and we all know about fake experts in the space. Heaver says that for the right amount of cash, one can find an expert — anything you want. Naturally, the other party will have to pay for their expert to refute the claim.

If there are many potential claimants, class action lawsuits can be combined into one case. These lawsuits are often handled by law firms as entrepreneurs. Claimants do not pay for them, but instead agree to share in any settlements or wins.

A class action against billionaire Mark Cuban whose fame Moskowitz Law Firm claims he used to “dupe million of Americans into investing their lives savings into the deceptive Voyager platform, and purchasing Voyager Earn Program accounts, which are not registered securities.”


Legal financing is another way to raise a legion of lawyers without having to sell both your kidneys. It’s also called settlement financing or third-party litigation funding. This happens when a private investor lends money to a plaintiff in exchange for a portion of a settlement or judgment. The outside investment is made to fund a successful lawsuit.

Bill Tilley is the managing partner of LegalTech Investor. He has been in the legal finance industry for 15 years. He and other fund managers like him look at an average of 20 cases per case. The full due-diligence process can cost up to $100,000 before funding is made. This includes determining if a case can be won and if the defendant is willing to pay.

“The biggest challenge in a cryptocurrency case is whether or not you can find and gather the money. Even if the case wins, resources must be spent to trace the money.”

It can be difficult to determine the jurisdiction where a case can legally be tried. Tilley discovered a troubling trend in crypto-mystery while conducting his own research on litigation funding. He recalls that he has seen cases in crypto where it was difficult to determine the jurisdiction. They will have multiple entities located in different countries. Crypto law can be difficult to understand.


For the past several years, Corbett has been planning to create a blockchain-specialized litigation fund. He says that it was not a good idea to launch this fund when everything was going up, but with the bear market making investors more dissatisfied, things are looking up in crypto law. Nemesis, his litigation fund, is now live.

The litigation funding industry is rapidly growing and has become a financial solution in a few cases. Its maturity is partly due to increasing competition in investments. This requires the funder, in addition to providing capital to the case, to add value. According to him, this has led to a rise of domain-focused funds.

“Like all investors, it is important that you build trust with plaintiffs.

Jurisdiction plays a decisive role. He says that it is impossible to enforce judgments against certain people in certain countries so we must pass such matters on. He also notes that the United States and United Kingdom are the largest markets for blockchain law, as enforcement of court orders can be done relatively easily. He also notes that the British Virgin Islands are interesting as a number of blockchain projects have used these structures. He says that the U.S., U.K., Australia and EU have developed legal funding industries, but not all jurisdictions allow cases to be funded by third parties.

An overview of Nemesis’ investment criteria. Source: Nemesis

Similar to Tilley’s company, Corbett states that Tilley’s Nemesis team reviews cases to determine which ones are the most appealing from an investment standpoint. He says that “we look to either multiples of the investment” and that a percentage is possible. This is because many of the outcomes can be determined by the director’s insurance plans of the defendant, which are often the last resort payers. Corbett states, “If the opponent doesn’t have money, the action often falls by the wayside.”

Besides making lots of money, Tilley explained that legal funders also “get the added benefit that they can help some people who have been wronged that wouldn’t otherwise have access to the justice systems today.”

“We can help fix the problem of bad actors by holding them responsible — so crypto will become stronger, more secure and more reliable in 5 to 10 years.

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Elias Ahonen

Elias Ahonen, a Finnish-Canadian author who is based in Dubai, has worked all over the globe as a blockchain consultant after he bought his first Bitcoins in 2013. The story of the industry is told in his book, “Blockland” (link below). He has a MA in International & Comparative Law, whose thesis is about NFT & metaverse regulations.

Opinion writer on 7trade7