Fraud Class Action Seeks to Recover Losses From Ethereum Crypto Staking Firm

Lido is a general partnership running an Ethereum staking business in which people earn money in exchange for putting their crypto assets at risk using a protocol that verifies transactions on the Ethereum blockchain, said Andrew Samuels’ fraud class action Sunday (docket 3:23-cv-06492) in U.S. District Court for Northern California in San Francisco. Lido’s business is “straightforward,” said the complaint. It takes users’ assets, pools them together and hires service providers, called validators, to stake the assets, it said. A decentralized autonomous organization, Lido keeps 5% of the proceeds of the staking process, pays 5% to the validators and sends the rest to its customers, it said. Lido has ended up staking more than $20 billion at a time, the complaint said. But four Silicon Valley venture capital firms behind Lido weren’t content “simply to run a fabulously lucrative business,” said the complaint. Instead, they wanted to sell equity in that business to the public through a security that Lido created, called LDO, but “no one ever registered LDO with the SEC,” in violation of U.S. securities laws, it said. As part of Lido’s efforts to solicit secondary-market purchases of LDO, Lido caused LDO to be listed for trading on U.S.-based crypto exchanges, said the complaint. Individuals, including plaintiff Samuels of Solano County, California, bought LDO tokens on those U.S.-based crypto exchanges, it said. “By paying third parties in the U.S. to list Lido for secondary-market sales with the express purpose of financially benefiting Lido and its venture-capital controllers, Lido rendered itself a statutory seller of those securities” and is liable to Samuels and members of his potential class for their losses, it said.