cryptocurrencies / gopixa

The number of U.S. securities class action filings declined in 2022, but cases against crypto firms surged amid turmoil and alleged misconduct in that space, new research finds

The volume of securities class actions in both state and federal courts dropped by 5% last year to 208 cases, leaving the number of filings down by almost 40% from 2020, according to a new report from Cornerstone Research and the Stanford Law School Securities Class Action Clearinghouse.

The overall reduction in filings represented the third straight annual drop, it noted.

“The 2022 decline was largely due to a continued decline in federal M&A filing activity,” the report said, noting that non-M&A filings were essentially flat year over year.

However, while total filings dropped, the report also found that cases involving crypto-related companies more than doubled from the previous year “as regulatory oversight increased and the cryptocurrency market weakened.”

“Crypto is the new frontier in securities fraud litigation,” said Joseph Grundfest, professor emeritus with Stanford Law School, in a release.

“The FTX implosion — combined with the failure of many crypto intermediaries — and the collapse of some crypto asset prices, will keep plaintiffs’ lawyers busy for years. If SPAC litigation is history, crypto litigation is the future, at least for now,” he said.

The dollars involved in the cases filed in 2022 also rose sharply from the previous year, the report found.

The total maximum dollar loss (MDL) of the cases filed in 2022 surged by 138% from the previous year to US$2.4 trillion, and the disclosure dollar loss (DDL) rose by 100% to the highest level on record, US$593 billion.

MDL represents the change in market cap from the peak during the class action period to the trading day immediately following the end of the class period, and DDL is the change in market cap between the trading day immediately preceding the end of the class action period and the trading day immediately following the end of the period.