ATLANTA (CN) --- In a playful opinion littered with puns referencing Clifford “T.I.” Harris’s songs, a unanimous panel of 11th Circuit judges upheld the dismissal of a class action securities lawsuit against the rapper and ended investors’ attempts to recoup money they say was lost on worthless cryptocurrency investments.
In a 21-page opinion embellished with no fewer than seven references to T.I.’s oeuvre, a three-judge panel of the Atlanta-based appeals court ruled that the lawsuit failed to plausibly allege that the rapper or his business associate Ryan Felton fraudulently hid information which would have allowed the investors to assert claims under sections of the Securities Act.
A class of investors led by Kenneth Fedance sued T.I. and Felton in May 2019 after investing thousands to buy FLiK tokens, a cryptocurrency promoted by the rapper and other celebrities, including comedian Kevin Hart.
The sale of the tokens was orchestrated to help raise money to launch FLiK and fund its movie-streaming platform.
But the platform never launched and the company no longer exists. After reaching a peak price of about 34 cents in October 2019, the value of the cryptocurrency plummeted to $0.008 per token by August 2018.
The class claimed that T.I. and Felton engaged in a “pump-and-dump” scheme by making false representations in violation of federal and state securities laws in order to inflate the price of the tokens. They also alleged that the tokens were unregistered securities.
An attorney for Fedance argued during a hearing last month that the complaint should be allowed to go forward because FLiK’s founders hid facts that would have allowed Fedance to uncover the illegal scheme earlier.
But the panel rejected that argument Monday, finding that Fedance and the class members had all the facts necessary “before, during, or soon after the initial coin offering” and were not prevented from realizing that they had invested in FLiK tokens in August and September 2017.
“Anyone in Fedance’s position could say 'You Know What It Is,'” U.S. Circuit Judge William Pryor, a George W. Bush appointee, wrote on behalf of the panel, referring to T.I.'s 2007 hit featuring Wyclef Jean.
“In conclusory fashion, Fedance alleges that neither he nor putative class members could bring claims for the sale of unregistered securities within the one-year limitations period because Felton and Harris fraudulently concealed the facts necessary to reach the legal conclusion that FLiK Tokens were securities. But you cannot make fraudulent concealment mean “Whatever You Like,'" Pryor wrote, quoting another song title.
Attorney Albert Chapar, who represents T.I., applauded the decision Monday.
“Nothing that T.I. or Felton did could have in any way prevented the plaintiff representative of the class, Mr. Fedance, or any plaintiff from knowing they had possible securities claims,” Chapar said.
Monday’s opinion also answers questions about whether the Securities Act allows for equitable tolling.
U.S. District Judge Charles Pannell, Jr. ruled last year that the one-year statute of limitations under the Securities Act barred the class’s claims because the lawsuit was filed roughly 21 months after Fedance bought his FLiK tokens.
The opinion explains that Pannell “made the 'all-too-common mistake' of conflating the doctrine of fraudulent concealment, an equitable-tolling doctrine, with the discovery rule” and found that the statute does not foreclose equitable tolling.
Attorney Alexander Loftus, who represents Fedance, said the ruling “was no surprise” given the panel’s frosty reception to the case during oral arguments in May, but said he was pleased that the 11th Circuit corrected the lower court’s error.
“What’s good is that they’re really clear that tolling does apply and in other cases this is going to have a great effect for plaintiffs everywhere… It’s a really good result big picture,” Loftus said.
Loftus said his client does not plan on pursuing any further appeals in the case.
Pryor was joined on the unanimous panel by U.S. Circuit Judge Robert Luck, a Donald Trump appointee, and U.S. District Judge Emily Marks, another Trump appointee sitting by designation from the Middle District of Alabama.
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