The ICO-funded startup Blockchain Terminal, or BCT, has threatened a lawsuit against Larry Cermak, head analyst for crypto news site The Block. The suit, which was sent to The Block but may not have been formally filed, claims that a recent report by The Block defamed Blockchain Terminal, and seeks $40 million in damages from Cermak.
It seems clear, though, that the suit was ineptly assembled: The author of the expose was Block writer Frank Chaparro, not Larry Cermak.
The December 10 report, based on two months of reporting by Chaparro and others, found that Shaun MacDonald, a leader of Blockchain Terminal, was actually convicted hedge-fund fraudster Boaz Manor. The report cited claims by former BCT employees of a number of other deceptive practices, including the installation of a figurehead CEO to conceal Manor’s leadership role. Those core claims have now been further substantiated by follow-up reporting from Canada’s Financial Post, and by Manor/MacDonald himself in an interview:
The suit from BCT (which can be read here) seems almost certain to be dismissed before reaching open court, thanks to a number of basic errors. In addition to naming the wrong defendant, the suit makes a claim of defamation without specifying what elements of The Block’s story are defamatory or false. Further, it fails to clearly meet New York’s defamation standard of either malice or “gross irresponsibility” in reporting methods. In fact, the suit itself describes numerous attempts by The Block to obtain information and comment from members of the BCT team, and from numerous independent sources.
“If the lawsuit was even filed, which isn’t clear, it has no merit and will be vigorously defended,” said Stephen Palley, lawyer for The Block. “This is the kind of lawsuit that clutters the legal system and wastes everyone’s time.” According to Palley, the suit still hasn’t appeared in New York’s online database of legal filings, meaning it may not have actually been filed.
The suit’s requests for redress are also highly unusual. In addition to financial claims, the suit asks a judge for “immediate deletion and retraction of the Cermak [sic] article,” a possible violation of the First Amendment.
David Silver, an increasingly prominent prosecutor of cases against allegedly fraudulent blockchain operations, wrote on Twitter that the suit shows “how much trouble @BCTerminal is in,” and that “the lawsuit is not written by anyone who has successfully drafted or filed a legitimate complaint in their professional lives. It contains glaring formatting errors, does not tell an actual story, and actually admits that [The Block’s] story was sourced.”
If the suit were dismissed without prejudice, it would be possible for Blockchain Terminal to re-draft and re-file the suit.
The only specific piece of The Block’s reporting that is disputed in the suit is the claim that CNBC CryptoTrader host Ran NeuNer was an investor in BCT. That claim, however, has also now been confirmed by NeuNer himself in a lengthy Medium post, in which he describes personally investing $350,000 in BCT. This was intended to refute allegations that Ran acted as a middleman or bundler for another $950,000 in investments.
In the course of this rebuttal, however, NeuNer implicates himself in a conflict of interest. He describes accepting a paid advisory role at BCT before publishing a tweet praising the product. He then “sent a list of responses [to the tweet] to the company.” Despite this, NeuNer claims he was not “paid to tweet about the project.” While he may not literally have been given currency in exchange for a tweet, he was, by his own admission, engaging in promotional and lead-generation activities for a company that was paying him. This mixing of roles violates basic standards of journalistic integrity.
NeuNer further admits that he knew about the key information reported by The Block, including Boaz Manor’s role in the company and Blockchain Terminal’s financial problems, as early as September, but did not disclose that information to his audience. CNBC did not respond to an inquiry about NeuNer’s actions and CNBC’s relevant ethics policies.
The Block founder Mike Dudas provided the following statement in response to the lawsuit and NeuNer:
“We stand by our reporting on Blockchain Terminal, much of which has been confirmed independently by Boaz Manor himself, who admitted in a recorded video interview that he had changed his name to avoid the stigma associated with his Canadian criminal convictions. The reporting has also been confirmed by reporters from other news sources. It has also been confirmed by media personality Ran NeuNer, who learned of Manor’s real identity in September, and said nothing about it to the public, while terminating his own relationship with BCT (this is according to his own blog post).
“The so-called lawsuit that [Blockchain Terminal] claims to have filed against Block contractor Larry Cermak is frivolous at best and will be vigorously defended. It is also unfortunate that Ran NeuNer has chosen to attack The Block and Larry Cermak via a Medium article, news interviews, and tweets over the past week. These attacks do not deter us from our mission to provide useful reporting in the crypto space, even when it makes people who are the subjects of our investigation unhappy. We are considering all of our legal options, including a lawsuit against Mr. NeuNer for defamation and libel.”