IN RE BIBOX GROUP HOLDINGS LIMITED SECURITIES LITIGATION

Background

The case concerns claims arising from defendants’ issuance of crypto-assets and operation of a crypto-asset exchange. Lead plaintiff Alexander Clifford asserted claims under federal securities laws and state “Blue Sky” securities laws. In an April 16, 2021 order, the court granted defendants’ motion to dismiss all of Clifford’s claims. The earlier order concluded that Clifford lacked standing to sue concerning crypto-assets he had not purchased and that claims concerning an asset he had purchased were untimely. For the Illinois Blue Sky claims, the court relied on Clifford’s failure to comply with the law’s pre-suit notice requirement.

Clifford moved for partial reconsideration only as to the Illinois claims. He argued that the court had misunderstood when the six-month notice period began. He also requested leave to amend his complaint.

Legal standard and analysis

The court explained that reconsideration is an extraordinary remedy generally available only for an intervening change in controlling law, new evidence, or a need to correct clear error or prevent manifest injustice. It is not an opportunity to relitigate old issues or present arguments that could have been made earlier.

The Illinois law at issue requires a purchaser seeking to rescind a securities sale to notify each person from whom recovery is sought within six months after the purchaser has knowledge that the sale is voidable. The court treated this requirement as a condition that must be satisfied before the claim can proceed, rather than as a statute of limitations. The court predicted that the Illinois Supreme Court would follow an Illinois appellate decision holding that constructive knowledge can start the six-month period. Constructive knowledge means that the relevant facts were available and sufficient to put the person in a position to understand that the transaction might be legally actionable; actual or subjective understanding of a specific legal claim is not required.

Applying that rule, the court relied on Clifford’s complaint, which stated that he became aware on April 3, 2019 that he could bring claims concerning the defendants’ conduct. The court determined that the publication that day of the Securities and Exchange Commission’s framework for analyzing digital-asset investment contracts gave Clifford constructive knowledge that his purchase of an unregistered security could be actionable. Clifford sent notices expressing his intent to rescind on April 1, 2020, more than six months later. The court therefore rejected his argument that the notice period did not begin until he understood that he had a claim specifically under the Illinois Blue Sky law.

Amendment request and disposition

The court also denied leave to amend. It found that Clifford had already had repeated opportunities to amend, had chosen to rely on his existing pleadings after defendants identified the notice problem, and sought another amendment only at a late stage without providing a proposed amended complaint or revised language. The court further found amendment futile because adding the date of Clifford’s subjective knowledge would not cure the defect: subjective knowledge was not the relevant standard under the court’s interpretation of the Illinois notice provision.

The court denied Clifford’s April 28, 2021 motion for reconsideration. This order was a ruling on the request to revisit the earlier dismissal, rather than a new merits determination of the underlying securities claims.