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Crypto Leaks Comments by Partner ‘Uniquely Stupid,’ Judge Says

Oct. 3, 2022, 10:47 PM

A New York judge Monday called a Roche Freedman co-founding partner’s leaked comments boasting about his firm’s relationship with a crypto startup “uniquely stupid.”

Katherine Polk Failla, a U.S. district judge for the Southern District of New York, also voiced concerns about the firm’s motivations for filing a class action accusing crypto exchange Bitfinex and affiliate Tether of market manipulation.

She said she will decide within a week whether the firm should be booted from representing plaintiffs in the case.

Monday’s hearing came more than a month after a website called Crypto Leaks released recordings of firm co-founder Kyle Roche discussing a tight relationship with Ava Labs, a blockchain developer. Roche has denied allegations that his firm has used litigation to target Ava Labs competitors.

The recordings also showed Roche making disparaging remarks about class members in general and jurors.

After the leak, defendants and Roche Freedman’s co-lead counsel—the law firms Selendy Gay Elsberg and Schneider Wallace—filed motions for the firm’s removal from the case. A different plaintiffs firm also urged Failla to reconsider its 2020 appointment of lead counsel in the matter.

During the hearing, Roche Freedman name partner Devin Freedman acknowledged that Roche’s comments were “stupid,” but he argued there’s no evidence to support a charge that the firm brought a lawsuit to help Ava Labs.

He claimed that the leaks were orchestrated by a defendant, which he did not name, in a separate action and that the firm should remain counsel because it has the most expertise on the underlying issues.

Freedman said he and Roche began working on the lawsuit before Ava Labs was even in existence. To protect against the appearance of impropriety, Roche has been kicked off the firm’s class action practice and “walled off” from all existing class action cases, Freedman said.

Lawyers for Bitfinex and Tether argued that the steps weren’t enough, claiming the videos raised serious concerns about whether the firm has abused the discovery process.

Selendy Gay Elsberg and Schneider Wallace also requested the firm be removed from the matter, claiming it would eliminate a “distraction” created by the recordings.

The firms, however, said they would have no issue working with Roche Freedman if the boutique remained on the case.

Expats of the prominent litigation firm Boies Schiller started Roche Freedman in 2019 and it now has 25 lawyers in New York, Miami and Boston.

The firm, among the most active in the crypto class action space, has filed more than a dozen lawsuits against crypto exchanges and token issuers on behalf of investors and has earned lead counsel status in many of them.

The lawsuit against Bitfinex and Tether alleges they were part of a scheme to manipulate the cryptocurrency market and defraud investors. Some of the claims survived a motion to dismiss in 2021.

Named plaintiffs in the Bitfinex/Tether action submitted declarations in September saying they wanted to continue to be represented by Roche Freedman.

To contact the reporter on this story: Justin Wise at jwise@bloombergindustry.com

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; John Hughes at jhughes@bloombergindustry.com