Bloomberg Law
Free Newsletter Sign Up
Login
BROWSE
Bloomberg Law
Welcome
Login
Advanced Search Go
Free Newsletter Sign Up

Roche Firm Booted From Tether Action After Crypto Leaks Post (1)

Oct. 13, 2022, 6:53 PMUpdated: Oct. 13, 2022, 8:54 PM

A New York judge on Thursday removed Roche Freedman from representing plaintiffs in a class action that accuses the crypto exchange Bitfinex and Tether, the issuer of the USDT stablecoin, of market manipulation.

The decision is a blow for Roche Freedman after videos posted on a website called Crypto Leaks showed founding partner Kyle Roche boasting about the law firm’s relationship with the crypto startup Ava Labs.

Katherine Polk Failla, a U.S. district judge for the Southern District of New York, said in a hearing Thursday that the firm’s continued participation in the case could derail litigation. She said she would modify her initial lead counsel appointment to remove the firm.

Allowing the firm to continue serving as counsel “with the metaphorical baggage they now carry is not in the best interests of the class,” Failla said.

Roche Freedman did not immediately return a request for comment.

During an Oct. 3 hearing, Failla called Roche’s comments “uniquely stupid” and pressed co-founder Devin “Velvel” Freedman on the firm’s conduct while litigating the 2019 lawsuit.

Freedman said Roche’s comments were “stupid” but argued there was no evidence Roche Freedman brought a lawsuit to help Ava Labs, and that concerns about the law firm abusing discovery were unfounded.

The law firms Selendy Gay Elsberg and Schneider Wallace will remain lead counsel for the proposed class, which is pursuing claims that the defendants manipulated prices.

Roche Denial

Roche has denied his firm has used litigation to target Ava Labs competitors. Ava Labs CEO Emin Gün Sirer has also said that the videos posted on Crypto Leaks showed Roche making false statements about their relationship.

Following the disclosure of the recordings in August, Roche’s firm kicked him off its class action practice and barred him from participating in ongoing class matters. Freedman argued that it took such steps to protect against the appearance of impropriety.

Still, Bitfinex and Tether moved to terminate Roche Freedman from the case, claiming the comments raised concerns about the firm’s motivations. Roche Freedman’s co-counsel, meanwhile, argued that booting the firm would eliminate a distraction.

A separate plaintiffs firm filed a motion to substitute Roche Freedman as lead counsel, but Failla on Thursday rejected that application.

Disqualification

Roche Freedman faces disqualification motions in at least four other cases, according to federal court filings.

A different New York judge has scheduled a Friday hearing in an action the firm brought on behalf of investors against the Tron Foundation, the company behind the TRON blockchain protocol.

Launched in 2019 by expats of the prominent litigation shop Boies Schiller, Roche Freedman has become one of the most active firms in the cryptocurrency class action space.

The firm, which was granted lead counsel status in the Bitfinex and Tether action in 2020, argued that it had the most expertise in digital assets and that Roche’s “false comments” should not impugn the rest of the firm.

Freedman also claimed during the Oct. 3 hearing that a defendant in one of the actions the firm brought was behind the surreptitious recordings of Roche.

Failla, however, said that Roche’s comments were “too detailed to dismiss out of hand.” The putative class also will not suffer from any diminished quality of legal representation with the law firm’s removal, she concluded.

(Adds comment attempt, case details from fifth paragraph.)

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