Balestra v. ATBCOIN LLC
- Denise Cote
- 1:17-cv-10001
- U.S. District Court · Southern District of New York
- 14
In Balestra v. ATBCOIN, Judge Broderick preliminarily approved a $250,000 class settlement but denied enforcement without prejudice to renewal.
The ruling affects Raymond Balestra, the proposed class of ATB Coin investors, ATBCOIN LLC, Edward Ng, Herbert W. Hoover, the appointed claims administrator, and the parties’ counsel. It sets the process for notifying class members and seeking final approval of the settlement, but it does not grant final settlement approval.
What happened
In Balestra v. ATBCOIN LLC, Raymond Balestra sued ATBCOIN LLC, Edward Ng, and Herbert W. Hoover under the Securities Act of 1933, claiming that ATB Coins were unregistered securities. The parties proposed a $250,000 settlement fund for a class of investors.
The court found that the proposed settlement appeared fair, reasonable, and adequate, and that the proposed class met the requirements for settlement certification. It also approved the proposed notice plan, appointed Strategic Claims Services as claims administrator, and set procedures leading to a final fairness hearing. The court separately denied Balestra’s motion to enforce the settlement because the motion did not identify a proper procedural vehicle or rule, but allowed him to renew it.
Judge Vernon S. Broderick granted preliminary approval of the class settlement and conditionally certified the settlement class, while denying the enforcement motion without prejudice to renewal. The defendants were also ordered to provide contact information and file notices of appearance.
The detailed version
- Balestra v. ATBCOIN LLC · No. 1:17-cv-10001
- Denise Cote
- Mar. 29, 2022
Background
Raymond Balestra brought a proposed class action against ATBCOIN LLC, Edward Ng, and Herbert W. Hoover under Sections 12(a)(1) and 15(a) of the Securities Act of 1933. He alleged that ATB Coins, sold through ATBCOIN’s initial coin offering, were unregistered securities. Balestra purchased 388.5 ATB Coins for $690.66, and the opinion states that their value had declined by more than 85 percent by March 11, 2018. The opinion says these facts are provided for background and are not findings of fact.
The parties reached a proposed settlement providing for a $250,000 settlement fund. Defendants’ counsel later informed the court that the defendants could not fund the settlement and sought to withdraw. The defendants did not file the response or notice of appearance required by an earlier court order. The court also noted that ATBCOIN LLC could not appear in federal court without counsel.
Preliminary Approval of Settlement
The court granted Lead Plaintiff’s motion for preliminary approval of the proposed class action settlement. At the preliminary stage, the court considered whether there was sufficient basis to send the settlement to class members and hold a full fairness hearing. It found that the agreement resulted from arm’s-length negotiations conducted after the court denied the defendants’ motion to dismiss, and that the $250,000 amount fell within the range of possible approval given the risks of proving liability and obtaining a recovery.
The court acknowledged the defendants’ apparent inability to pay. It nevertheless found that this circumstance supported approval because completing the settlement could provide some recovery when obtaining a judgment might be difficult or impossible. The court concluded that the settlement was fair, reasonable, and adequate.
Settlement Class and Administration
The court conditionally certified the proposed class for settlement purposes only. It found that the class met the requirements of Federal Rule of Civil Procedure 23, including numerosity, common legal and factual questions, typicality, adequate representation, predominance of common issues, and superiority of the class-action method. The court conditionally certified Balestra as class representative and appointed Levi & Korsinsky, LLP as lead counsel.
The court approved the proposed class notice, finding that it satisfied Rule 23 and the applicable securities-law requirements and was the best notice practicable under the circumstances. Because the defendants reportedly did not have names, email addresses, or physical addresses for potential class members, the proposed notice would be published through a national wire service, lead counsel’s website, CoinDesk.com, and a Reddit forum dedicated to ATB Coin. The court appointed Strategic Claims Services as claims administrator.
Motion to Enforce
The court denied Lead Plaintiff’s motion to enforce the settlement, but granted leave to renew. The court stated that the Federal Rules of Civil Procedure do not contain a motion formally called a “motion to enforce” and that the motion did not clearly identify what relief was requested or under which rule it was brought. The court noted that possible procedures could include a contempt proceeding, a new breach-of-contract action, or a motion for relief from judgment, but it did not decide which procedure was proper.
Orders and Next Steps
The court ordered the claims administrator to mail notice and claim forms within 31 business days. It set deadlines for a motion seeking final approval, requests for exclusion or objections, reply papers, and claim forms. The court scheduled a final fairness hearing for August 30, 2022, by telephone, and ordered the parties to comply with the settlement agreement. Lead Plaintiff’s counsel was ordered to serve the order on Ng and Hoover and file proof of service. The defendants were again ordered to provide contact information to the pro se office and file notices of appearance within seven days.
Disposition
The motion for preliminary approval of the proposed class action settlement was granted. The motion to enforce the settlement was denied without prejudice to renewal.
Read the full 14-page opinion on CourtListener, the free public archive maintained by the Free Law Project.