Perkins Coie Sued Over Escrow Money Related to Crypto Project

Law firm Perkins Coie LLP and one of its partners mismanaged escrow money solicited from investors to fund a cryptocurrency mining project in Washington, a proposed class action filed in federal court alleges.

The complaint, filed Wednesday in the U.S. District Court for the Eastern District of Washington by plaintiff Jun Dam, claims that investors are owed damages in excess of $10 million for the alleged “misappropriation” of escrow money.

According to Dam, investors bought “tokens” that would enable them to access 1 watt of power and related infrastructure to mine cryptocurrency. Investors were told in promotional materials and solicitations that the escrow funds would be distributed to the project partners—Singapore-based GigaWatt Pte. Ltd. and its Washington-based affiliate Giga Watt Inc.—"in step with completion of the facilities.”

If “only 50% of the Giga Watt Project was completed, then the escrow agent was only permitted to disburse 50% of the Token investment proceedings,” the complaint said.

Dam alleges, however, that the more than $22 million held in escrow was distributed in full to the Giga Watt entities, despite the project only reaching 50% completion.

Giga Watt Inc. filed for bankruptcy in November 2018. The project was never finished, according to the complaint.

The lawsuit names partner Lowell Ness in his individual capacity, apparently singled out for lending his personal credibility to the project.

According to Dam, Perkins and Ness allowed the Giga Watt entities and their agent, Cryptonomos, to use their names, Ness’s image, and the firm’s logo on its website, a white paper, and other solicitation materials for the initial token offering.

Causes of action: With respect to all defendants, breach of fiduciary duty, Washington’s Consumer Protection Act, and Washington’s Escrow Agent Registration Act. As to the firm entities only, breach of express or implied agreement with the token holders and breach of agreements between the firm and the Giga Watt entities and Cryptonomos.

Relief: Actual, punitive, and statutory damages; attorneys fees and litigation costs; pre- and post-judgment interest; any other “just and proper” equitable, injunctive, or legal relief.

Potential Class Size: The complaint estimates that the proposed class, made up of all those “who hold Tokens that were purchased as of the date this complaint was filed,” includes hundreds of members across the U.S. and in foreign states.

Response: In response to Bloomberg Law’s request for comment, a spokesperson said, “Perkins Coie
does not comment on pending litigation, but the Firm intends to defend this case vigorously.”

Attorneys: Blood Hurst & O’Reardon LLP and Olympic Law Group.

The case is Dam v. Perkins Coie LLP, E.D. Wash., No. 2:20-cv-00464, complaint filed 12/16/20.