Overview
In an opinion Friday, Judge Stanton dismissed, on jurisdictional grounds, a case accusing the promoters of an initial coin offering of fraud, because the plaintiffs’ transactions did not occur domestically, as required by Morrison v. National Australia Bank, Ltd., 561 U.S. 247 (2010).
The plaintiffs offered declarations from two putative class members who did not live in the U.S. One was from from the United Arab Emirates and the other from the United Kingdom. According to the plaintiffs, there was nonetheless a basis for personal jurisdiction because the servers that hosted the website through which the coin sales were made were physically located in Kansas, and because, in all likelihood, the relevant blockchain “nodes” that would record the transactions publicly were likely located in the United States, as well.
Judge Stanton rejected this reasoning, and found the relevant question to be where the “change in the legal relationship” between the parties occurred:
[A]ll that machinery for generating, administering, and delivering the bitcoin could be located in Kansas, Germany or Brazil without affecting the location of the offer and acceptance of the purchase. Morrison dealt with the location of the change in the legal relationship between persons, not the electronic operations of creation, transport and delivery of the product. [The first plaintiff] did not purchase his bitcoins in Kansas. He purchased them in the United Arab Emirates, where he accepted the offer and agreed to the contract of purchase. [The second plaintiff] purchased his in Great Britain, not Kansas.
