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 The plaintiffs claim that NFTs bought on OpenSea, including from the Bored Ape Yacht Club collection, are now worthless because of their ”illegal nature.” They specifically referred to a Wells notice the platform received from the SEC as evidence of this. Meanwhile, a New York resident was fined $36 million for defrauding crypto investors, and the SEC is seeking sanctions against Elon Musk for missing testimony regarding his Twitter acquisition. Montenegro is also nearing a decision on the extradition of Terraform Labs co-founder Do Kwon to either the U.S. or South Korea.
 <h2 id="opensea-hit-with-lawsuit">OpenSea Hit With Lawsuit</h2>
 Two OpenSea users, Anthony Shnayderman and Itai Bronshtein, have <a href="https://www.binance.com/en-IN/square/post/2024-09-23-opensea-faces-class-action-lawsuit-over-alleged-unregistered-securities-sales-13916271051842" target="_self" rel="noopener noreferrer nofollow">filed a class-action lawsuit</a> against the NFT marketplace OpenSea. Shnayderman and Bronshtein are accusing the platform of selling unregistered securities contracts. The lawsuit was submitted on Sept. 19 in a Florida federal court, and claims that the NFTs purchased by the plaintiffs, including those from the Bored Ape Yacht Club collection, have become worthless because of their ”illegal nature.”
 Shnayderman and Bronshtein argue that the fact that OpenSea recently disclosed that it received a Wells notice from the Securities and Exchange Commission (SEC) suggests the platform could be held liable for facilitating the exchange of unregistered securities. A Wells notice is an indication that the SEC has completed an investigation and may pursue enforcement action.
 The lawsuit also specifically refers to recent SEC actions that were taken against NFT projects like <a href="https://www.sec.gov/newsroom/press-releases/2023-178" target="_self" rel="noopener noreferrer nofollow">Stoner Cats 2</a> and <a href="https://www.sec.gov/newsroom/press-releases/2023-163" target="_self" rel="noopener noreferrer nofollow">Impact Theory</a>, where the regulator classified the NFTs as unregistered securities sales. Additionally, the plaintiffs claim that, under the Howey test, the NFTs they bought on OpenSea were investment contracts as they meet the definition of securities under U.S. law. They allege the NFTs represented investments in a common enterprise with the expectation of profit based on the efforts of others.
 According to the plaintiffs, OpenSea’s NFT listings were deceptive and misled buyers into buying unlawful unregistered securities. They also claim that OpenSea breached a warranty by stating it will moderate its marketplace to prevent the sale of unregistered securities. They argue that OpenSea unjustly enriched itself by collecting fees on these sales as well, knowing that the transactions involved unregistered securities.
 In a statement, Adam Moskowitz, managing partner of The Moskowitz Law Firm and counsel for Shnayderman and Bronshtein, <a href="https://cointelegraph.com/news/opensea-users-nfts-securities-class-lawsuit" target="_self" rel="noopener noreferrer nofollow">pointed out</a> the need for a more regulated environment for NFT sales. Moskowitz also shared that he is more than willing to collaborate with OpenSea to develop a regulatory framework that is beneficial for both consumers and the broader crypto industry.&nbsp;
 <h2 id="new-york-resident-fined-for-crypto-fraud">New York Resident Fined for Crypto Fraud</h2>
 In other legal news related to the crypto industry, a federal court judge has fined New York resident William Koo Ichioka $36 million for defrauding crypto investors by promising high returns and using their funds to finance his luxurious lifestyle. According to a <a href="https://www.cftc.gov/PressRoom/PressReleases/8970-24" target="_self" rel="noopener noreferrer nofollow">statement</a> from the United States Commodity Futures Trading Commission (CFTC) on Sept. 20, US District Court Judge Vince Chhabria ordered Ichioka to pay $31 million in restitution to victims of his fraudulent crypto and foreign exchange scheme, along with an additional $5 million civil monetary penalty.
 Ichioka's scheme started in 2018, and involved accepting money from investors under the false promise of delivering 10% returns every 30 business days. While he did invest some of the funds in foreign currencies and crypto like he promised, the CFTC revealed that Ichioka commingled investor money with his own and spent it on personal expenses, including rent, jewelry, watches, and luxury vehicles.
 This latest ruling was made after a prior court decision in August of 2023, when Ichioka was banned from trading in CFTC-regulated markets and from registering with the CFTC.&nbsp;
 The case is part of a broader crackdown on people who are falsely promising high returns in the crypto space. This crackdown is certainly very necessary as Americans lost $5.6 billion to crypto-related scams and fraud in 2023, a 45% increase from the previous year.&nbsp;
 The US Federal Bureau of Investigation (FBI) also <a href="https://www.ic3.gov/Media/PDF/AnnualReport/2023_IC3CryptocurrencyReport.pdf" target="_self" rel="noopener noreferrer nofollow">reported</a> that out of the 69,000 crypto-related complaints it received, people over 60 were the most affected as they accounted for close to $1.6 billion of the losses.
 Crypto-related complaints reported to IC3 (Source: <a href="https://www.ic3.gov/Media/PDF/AnnualReport/2023_IC3CryptocurrencyReport.pdf" target="_self" rel="noopener noreferrer nofollow">Internet Crime Complaint Center</a>)
 <h2 id="sec-seeks-sanctions-against-elon-musk">SEC Seeks Sanctions Against Elon Musk</h2>
 Legally speaking, Elon Musk also has his hands full at the moment as the SEC is seeking <a href="https://www.reuters.com/technology/us-sec-intends-seek-sanctions-against-elon-musk-twitter-probe-2024-09-20/" target="_self" rel="noopener noreferrer nofollow">legal and monetary sanctions</a> against the billionaire for allegedly failing to provide scheduled testimony with regards to his $44 billion acquisition of Twitter in 2022. The SEC wants to hold Musk in civil contempt for violating the terms of a May 2024 agreement that set the testimony date for Sept. 19. The SEC also wants to recover travel costs and other relief because of Musk's cancellation of the meetings.
 Musk’s representatives reportedly requested several postponements for the testimony, but the SEC claims that he did not get the proper consent from the commission or a court order to reschedule the meeting.&nbsp;
 In response to this, Musk’s legal team called the SEC's actions “drastic,” and argued that the testimony has already been rescheduled for Oct. 3 in Los Angeles. Musk's attorney, Alex Spiro, explained that the rescheduling was due to an emergency and that sanctions were unnecessary when considering the very minor delay in the investigation.
 This SEC case is one of several regulatory challenges Musk is facing internationally. In August, the Irish Data Protection Commission sued X for <a href="https://www.rte.ie/news/business/2024/0806/1463712-dpc-takes-court-action-against-twitter-over-data-concerns/" target="_self" rel="noopener noreferrer nofollow">AI data violations</a> in the European Union. Additionally, Brazil’s Supreme Court recently <a href="https://www.aljazeera.com/news/2024/9/19/judge-in-brazil-orders-musks-x-to-obey-ban-or-face-daily-fine" target="_self" rel="noopener noreferrer nofollow">upheld a ban</a> on X, and in the UK, member of parliament Dawn Butler suggested summoning Musk to testify about the platform’s content moderation policies.
 <h2 id="do-kwon-awaits-extradition-ruling">Do Kwon Awaits Extradition Ruling</h2>
 Meanwhile, Montenegro’s Ministry of Justice is ready to decide whether Terraform Labs co-founder Do Kwon will be extradited to the United States or South Korea, after a ruling by the country's Supreme Court. On Sept. 20, the Supreme Court <a href="https://sudovi.me/vrhs/sadrzaj/Jndd" target="_self" rel="noopener noreferrer nofollow">submitted</a> Kwon’s case to the justice minister after determining that both the US and South Korea met the necessary conditions to request his extradition.
 Do Kwon became a central figure in the fallout from the collapse of the Terra ecosystem that happened in 2022. This event triggered a wave of bankruptcies in the crypto sector, and ended up affecting firms like Celsius, FTX, and BlockFi.&nbsp;
 Both US and South Korean authorities charged Kwon and his associates for their roles in Terra’s downfall. After months of evading authorities, Kwon was eventually arrested in Montenegro in 2023 for using falsified travel documents and served a four-month prison sentence.
 Since his release, Kwon has been in legal limbo as Montenegro's courts weigh competing motions from his legal team, South Korea, and the United States. While a previous ruling referred the extradition decision to Montenegro’s then-justice minister, Andrej Milović, an appeal from Kwon’s lawyers led to more delays. Bojan Božović, the new justice minister, will now potentially decide Kwon’s fate.
 In the US, Kwon and Terraform Labs were found liable for defrauding investors in a civil case with the SEC. Kwon and Terraform Labs both agreed to pay $4.5 billion in penalties and disgorgement. Terraform Labs filed for bankruptcy in January, and a judge also recently <a href="https://www.reuters.com/technology/terraform-labs-approved-bankruptcy-wind-down-after-us-sec-settlement-2024-09-19/" target="_self" rel="noopener noreferrer nofollow">approved plans</a> to wind down operations, though many investors are unlikely to recover their losses.
 Meanwhile, South Korean authorities have already indicted several people connected to Terraform, including co-founder Hyun-seong Shin. Montenegro has also approved the extradition of Terraform Labs’ former CFO Han Chang-Joon, who was arrested alongside Kwon, to South Korea.
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OpenSea Sued by Users Claiming Platform Sold Unregistered Securities

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