Dfinity Foundation v. New York Times Company

Background

Dfinity Foundation, a not-for-profit organization organized under Swiss law with its principal place of business in Zurich, developed the Internet Computer blockchain and launched the ICP Token in May 2021. The token’s value fell sharply after its launch.

Arkham Intelligence, described in the opinion as a New York-based cryptocurrency analysis firm organized under Delaware law, published a report and video analyzing possible reasons for the token’s decline. The New York Times Company later published an article by Andrew Ross Sorkin and Ephrat Livni discussing the token’s rise and fall and quoting Arkham, Dfinity, and others.

Dfinity sued the Times Defendants and the Arkham Defendants. It asserted defamation claims against all defendants and a claim under New York General Business Law § 349 against the Arkham Defendants. Section 349 prohibits deceptive acts or practices in business, trade, or commerce. Dfinity identified twelve challenged statements in the Arkham report and video and five in the Times article. It later abandoned its defamation claim based on two of the five statements attributed to the Times Defendants.

Defamation claims

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint alleges enough facts to state a legally sufficient claim. The court explained that a defamation claim required Dfinity to allege a written defamatory statement about it, publication to a third party, fault, falsity, and either special damages or a statement actionable without proof of special damages.

The court held that the challenged statements conveyed opinions rather than actionable facts. Under the court’s analysis, whether a statement is fact or opinion depends on its meaning, whether it can objectively be proven true or false, the communication’s full context and tone, and the broader setting.

As to the Times Defendants, the court found that comparing the ICP Token’s launch to a company’s initial public offering was an innocuous analogy, not an assertion that the token was a security or that Dfinity violated securities laws. The court also found that the quoted Arkham theory about insiders transferring tokens was presented as a qualified theory based on disclosed facts and was followed in the article by alternative explanations from Dfinity and others. The remaining statement largely reported alleged findings in the Arkham report, and Dfinity had not shown that the factual material in that statement was false. The court therefore concluded that none of the challenged Times statements was actionable.

As to the Arkham Defendants, the court found that a reasonable reader would understand the report and video as Arkham’s opinions and inferences based on publicly available sources. The report’s cautionary language further indicated that Arkham was expressing opinions rather than established facts. The court separately held that Dfinity had not plausibly alleged actual malice, meaning subjective awareness that a statement was probably false or reckless disregard for whether it was true. The court therefore dismissed Dfinity’s defamation claim against the Arkham Defendants.

New York consumer-protection claim

Dfinity also claimed that the Arkham Defendants violated Section 349. The court stated that such a claim requires consumer-oriented conduct that was materially misleading and caused injury, with a broader effect on consumers or the public interest.

The court found that the complaint’s central alleged injuries were harm to Dfinity’s reputation and business and a decline in the ICP Token’s price. Those were primarily injuries to Dfinity, not consumers. The allegation that consumers were generally confused was also insufficient under the authorities discussed by the court. The court therefore dismissed the Section 349 claim.

Personal jurisdiction and disposition

Personal jurisdiction is a court’s authority over a particular defendant. The court explained that personal-jurisdiction issues ordinarily are addressed before the merits, but it proceeded to the legal sufficiency of the claims because the defendants collectively challenged the claims and the claims failed for the same reasons against the defendants whose jurisdiction was not disputed.

The motions by the Times Defendants, the Arkham Defendants, Keegan McNamara, and Jonah Bennett to dismiss for failure to state a claim were granted, and the case was dismissed. To the extent certain defendants also moved to dismiss for lack of personal jurisdiction, those motions were denied as moot because the case was dismissed on other grounds. The court specifically stated that Nick Longo’s personal-jurisdiction motion was moot. Jonah Bennett’s personal-jurisdiction motion was denied because he had not supported it with affidavits or other evidence. The Clerk was directed to close the case.