Law firm Roche Freedman is facing a second lawsuit from another former partner in an ongoing fight over cryptocurrency tokens said to have ballooned in value to $250 million.
Paul Fattaruso said in a complaint filed in Florida Tuesday that the firm stiffed him out of nearly $1 million in compensation related to his 2% equity stake after leaving Roche Freedman last year. He resinged from the firm in protest, saying his colleague Jason Cyrulnik was kicked out after crypto tokens the firm received for payment became incredibly valuable.
Cyrulnik and Fattaruso were among the 12 Boies Schiller litigators who launched the firm in 2020. Cyrulnik alleges in a separate case that the firm has tried to seize his $60 million share of cryptocurrency asset it was paid in lieu of cash for some legal fees.
Kyle Roche, a founding partner at Roche Freedman, did not immediately respond to a request for comment on the new lawsuit.
Fattaruso worked closely with Cyrulnik, a former name partner at Roche Freedman, and left the firm shortly after learning it had filed a lawsuit against Cyrulnik, according to the complaint. The firm alleged in the previous suit, which is still pending, that Cyrulnik was fired for “unprofessional, obstructionist, and abusive conduct.”
The pair have since reunited to form their own firm, Cyrulnik Fattaruso.
Roche’s lawyer, Sean Hecker at Kaplan Hecker & Fink, said in a statement that Fattaruso’s suit is “entirely without merit.”
“It is disappointing but not surprising that after losing his motion to dismiss Roche Freedman’s action in federal court in New York, Mr. Cyrulnik has enlisted his new junior partner to launch a new action in state court in Florida,” Hecker said.
Fattaruso alleges that some of the firm’s founders entered a “memorandum of understanding” that divvied up certain compensation separately from the way it would otherwise be shared according to the firm’s equity percentages.
Cryptocurrency “tokens” the firm was receiving were included in that carve out, according to Fattaruso, though he was not made aware of the arrangement when he joined the firm. Fattaruso’s complaint says he has an equity interest in the cryptocurrency as well as the law firm.
Those tokens, which the complaint does not identify, “skyrocketed” in value to more than $250 million in early February, Fattaruso said. A “substantial percentage” was agreed to be allocated to Cyrulnik, Fattaruso’s claim says.
Just as the crypto tokens went up in value, the firm voted to remove Cyrulnik from the partnership, according to Fattaruso’s complaint.
Regulatory bodies in Washington, New York, North Carolina and elsewhere have said lawyers can accept cryptocurrency as payment, though some states advise making clear whether any dramatic rise or fall in their value will trigger repayment obligations by firms or their clients.
It’s unclear what case generated the valuable crypto payment. Roche Freedman has numerous crypto-related clients, including estate of bitcoin developer David Kleiman in a lawsuit against alleged bitcoin creator Craig Wright.
The firm is also co-lead counsel in a class action case against iFinex Inc., owner of the cryptocurrency exchange Bitfinex and its associated stablecoin Tether. Bitfinex paid $18.5 million in February to settle a probe by New York State Attorney General Letitia James.
Cyrulnik claims in court filings that his $7.5 million book of business accounted for more than 60% of the firm’s gross revenue last year and kept it afloat while the cryptocurrency payment from its unidentified startup client appreciated in value.
Fattaruso is represented by Jeffrey Schneider, a Miami-based founding partner at Levine Kellogg Lehman Schneider + Grossman.
Cyrulnik is represented in his lawsuit by Marc Kasowitz, whose high-powered firm, Kasowitz Benson Torres, is where Cyrulnik’s brother is a commercial litigation partner, Bloomberg Law has reported.
Brian Baxter contributed to this report.