Strongblock Wants Dismissal or Arbitration of Investors’ Unregistered Securities Suit

Jenison Holdings SEZC, under the trade name “Strongblock,” filed a motion to dismiss a suit alleging that they failed to properly register its blockchain nodes as securities. Strongblock argues that since the plaintiffs, a group of investors, assented to the terms of service, which include a forced arbitration clause, this dispute must go through arbitration.

Per the filings, Jenison Holdings is a Special Economic Zone Company located in the  Cayman Islands. They operate under the trade name Strongblock and, in their words, sell subscriptions to their blockchain service. Customers purchase tokens, which are then used to buy nodes of blockchain, and then, for a monthly maintenance fee of $14.95, users can earn dividends in tokens on the nodes they own, which can then be exchanged for more nodes or sold to others for cash. 

The purpose, the plaintiffs allege, is for Strongblock to use the revenue to build up a network of nodes, which can serve as the infrastructure for future blockchain ventures. The complaint states that while Strongblock initially promised potentially infinite dividends from the nodes customers purchased, in April 2022, Strongblock arbitrarily capped lifetime rewards. The group of investors then sued arguing that these nodes are in fact securities under the Securities Act, and should have been registered as such.

In their motion, Jenison Holdings states that to participate in Strongblock, all customers checked a box asserting that they agreed to the terms and conditions. In such terms and conditions, a clause states that any dispute with regards to Strongblock must be resolved through “binding individual (not class) arbitration.” The agreement further states that the arbitration must be held in the Cayman Islands in English, and the arbitrator must be a commercial arbitrator  from the International Chamber of Commerce. As such, Jenison Holdings argues that this suit is moot and the judge should dismiss the case and compel arbitration under the Federal Arbitration Act.

The suit was filed in the Southern District of New York, where Jenison does business. The plaintiffs are represented by Government Law Group, PLLC and Zeisler, PLLC. Jenison Holdings is represented by Lathrop GPM, LLP