Clifford v. Tron Foundation

Background

Alexander Clifford and Chase Williams brought a proposed securities class action against TRON Foundation, Justin Sun, and Zhiqiang (Lucien) Chen. The complaint alleges that the defendants promoted, offered, and sold TRX tokens as unregistered securities through an initial coin offering. The complaint alleges that the defendants raised more than $70 million through that offering and that the price of the tokens later fell substantially. The opinion states that these facts were provided only as background and were not findings of fact.

After notice of the lawsuit was published, Corey Hardin, David Muhammad, and Chase Williams timely moved for appointment as lead plaintiffs and for approval of Roche Cyrulnik Freedman LLP and Selendy & Gay PLLC as co-lead counsel. The motion was unopposed.

Lead-plantiff analysis

The Private Securities Litigation Reform Act requires the court to appoint the person or group most capable of adequately representing the class. The court considered whether the movants filed a timely motion, had the largest financial interest in the requested relief, and made the preliminary showing required under Rule 23 of the Federal Rules of Civil Procedure.

The court found that the motion was timely. It also found that the movants had shown a significant financial interest based on their claimed losses: $284,787.00 for Hardin, $32,738.09 for Muhammad, and approximately $139.52 for Williams. The court noted that no other class member with greater losses had come forward.

The court further found that the movants met the preliminary requirements of typicality and adequacy. As TRX purchasers, their claims arose from the same alleged conduct and injuries as the proposed class members’ claims. The court found no evidence of conflicts between the movants and the class and found that the movants had sufficient interests in the case’s outcome. It also found that their proposed counsel were qualified, experienced, and able to conduct the litigation.

Because the movants satisfied the statutory factors and there were no competing motions, the court adopted the statutory presumption that they were the most adequate plaintiffs. The court found no basis to rebut that presumption.

Counsel and disposition

The court found that Roche Cyrulnik Freedman LLP and Selendy & Gay PLLC would adequately and effectively represent the class. Judge Vernon S. Broderick therefore granted the motion for appointment as lead plaintiffs and for approval of the selection of co-lead counsel. He appointed Corey Hardin, David Muhammad, and Chase Williams as lead plaintiffs and designated the two law firms as co-lead counsel.

The order directed the lead plaintiffs to file an amended complaint no later than 60 days after the opinion and order was issued. It directed the defendants to answer or otherwise respond to the second amended complaint no later than 30 days after service of that complaint. The order assigned co-lead counsel responsibility for coordinating pretrial activities, including presenting the plaintiffs’ positions, coordinating discovery, negotiating settlements, entering necessary stipulations, preparing the case for trial, and conducting trial.