Cryptofight: A Philly founder just filed what could be a watershed lawsuit for ICOs

In what might be a watershed case for Initial Coin Offerings (ICOs), a Philly founder has filed a suit against a Canadian blockchain company, Vanbex, over what it claims is the illegal use of its intellectual property.

Should the ruling be in favor of Philly-based Bryan Doreian, founding partner of El3ven, LLC, it could mark the first time the Security Exchange Commission formally treats an ICO in the context of a securities case. There’s some precedent, though: On Sept. 29, just days after the case was introduced, the SEC struck down a businessman and two companies for peddling fake ICOs.

The story here goes like this: Doreian’s company entered into negotiations with Vanbex about working together on an ICO for its healthcare platform in September 2016. The two parties signed a contract on Oct. 3, 2016 under which Vanbex, based in Vancouver, agreed to develop a technology platform for Elev3n and create and guide Elev3n through an ICO process. Doreian claims the company didn’t deliver on its promise, and that Vanbex hijacked Elev3n materials for use in an ICO of its own, Etherparty.

In court documents made publicly available Sept. 29, the Philly company claims Vanbex “has been unjustly enriched at Elev3n’s expense and exposed Elev3n to great risk that it will become noncompliant with regulations promulgated by the United States Securities and Exchange Commission (the ‘SEC’) and equivalent regulatory authorities in Canada.”

The plaintiff claims Vanbex committed computer crime, copyright infringement and was in breach of their contract. Here’s more insight straight from the docket:

On September 19, 2017, Elev3n through sheer “accident,” discovered that Vanbex had for months been unlawfully accessing Elev3n’s company computer systems in the USA to disseminate, distribute, and modify Elev3n’s confidential intellectual property in preparation for the pre-Sale and ICO.

Elev3n’s case is pending in the U.S. District Court for the Eastern District of Pennsylvania under case number 2:17-cv-04350-AB.

Mind you, Etherparty did pretty well. It reportedly raised $30 million and was prominently featured in the Huffington Post as a “digital token crowdsale to help fund further development on its user-friendly smart contracts platform.”

Huffpost: "#Etherparty Raises $30 Million to Bring #SmartContracts to the Masses"#ico #blockchainhttps://t.co/ICMHFsnLx4

— Hyperion (@HyperionExch) October 24, 2017

The Philly company is being represented by Delaware-based Julia Klein of Klein LLC and John Kirk of GrowthCounsel. Both declined to comment on the ongoing litigation.

Emails sent to Vanbex CEO Kevin Hobbs and founder Lisa Cheng were not responded to.