Civil Litigation Risks For Offerors Of Digital Tokens And Cryptocurrencies

On the heels of Bitcoin's rapid rise in value, 2017 introduced financial markets to the initial coin offering (ICO), a novel method of raising capital modeled loosely on the traditional initial public offering and facilitated by the emergence and proliferation of distributed ledger technology, known commonly as the "blockchain." In an ICO, the offeror typically accepts an established cryptocurrency, such as Bitcoin or Ether, in exchange for digital assets in the form of tokens or new cryptocurrencies to be exchanged via the offeror's new blockchain. Since 2016, more than 300 entities have raised an estimated $4 billion to $6 billion in capital through digital token sales and ICOs—figures that, according to some sources, surpass amounts raised through traditional early-stage venture capital financing during the same time period.