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Coinbase Must Face Customer Lawsuit in New York Court

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Coinbase must defend itself in a lawsuit filed by customers who claim that the company illegally sold securities without registering as a broker-dealer, a federal judge ruled on Friday. U.S. District Judge Paul Engelmayer in Manhattan dismissed Coinbase’s argument that it was not a “statutory seller” under federal securities laws because it did not transfer title to the 79 tokens customers traded.

Judge Engelmayer referenced the accusation that Coinbase facilitates transactions solely between itself and the customers, which led to the conclusion that the exchange was acting as a seller. He also rejected the dismissal of claims under the laws of California, Florida, and New Jersey, agreeing that customers adequately argued that Coinbase was a direct seller of the tokens.

Coinbase has consistently stated it does not list, offer, or sell securities on its platform. The company expressed its intent to defend itself against the remaining claims in court. Customer lawyers did not immediately comment on the ruling.

This ruling comes after the 2nd U.S. Circuit Court of Appeals revived parts of the lawsuit in April 2023, which had initially been dismissed by Engelmayer in February of the same year. Customers are seeking unspecified damages.

In addition to the private lawsuit, the U.S. Securities and Exchange Commission (SEC) is also suing Coinbase, alleging the exchange allowed the trading of tokens that should have been registered as securities. Last month, a separate federal judge temporarily paused the SEC’s case to allow Coinbase to seek clarification from the 2nd Circuit on whether digital token trades fall under the definition of investment contracts.

Novartis Must Face Whistleblower Claims of Paying Kickbacks for MS Drug Promotion

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A U.S. appeals court on Friday revived a whistleblower lawsuit against Swiss pharmaceutical company Novartis, accusing the company of paying illegal kickbacks to doctors to promote its multiple sclerosis drug, Gilenya. The 2nd U.S. Circuit Court of Appeals in Manhattan ruled 3-0 that Steven Camburn, a former Novartis sales representative, can proceed with his claims that Novartis violated the federal False Claims Act through fraudulent “sham” speaker events designed to increase Gilenya sales.

Camburn alleges that Novartis paid doctors substantial sums of money and treated them to dinners at upscale restaurants to speak at events that were presented as educational but were actually social gatherings. These events allegedly led to fraudulent claims being submitted to government health insurance programs, including Medicare, Medicaid, and TRICARE, for Gilenya prescriptions influenced by kickbacks.

Circuit Judge Myrna Perez stated that Camburn’s allegations—including the holding of speaker events with minimal attendance, excessive payments for canceled events, and selecting doctors who would promote prescriptions—created a “strong inference” of Novartis’ intent to induce fraud. The court aligned with other federal appeals courts, agreeing that when compensation has the purpose of inducing the purchase of federally reimbursable healthcare products, it violates the federal Anti-Kickback Statute.

The decision reversed a September 2022 dismissal by U.S. District Judge Kimba Wood and sent the case back to her court for further proceedings. Camburn’s lawyer, James Miller, expressed confidence in addressing the core allegations in court.

Camburn filed the lawsuit in May 2013, shortly after Gilenya was approved for federal use. The drug’s sales have since declined due to competition from generics, dropping from $3.22 billion in 2019 to $925 million in 2023, with only $443 million in sales in the first nine months of 2024.

In 2020, Novartis agreed to pay over $729 million to settle U.S. government charges for similar kickback violations. The case is identified as US ex rel Camburn v. Novartis Pharmaceuticals Corp, 2nd U.S. Circuit Court of Appeals, No. 22-2708.

OpenAI Pushes Back Against Musk’s Attempt to Block For-Profit Conversion

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OpenAI has asked a federal judge in California to reject Elon Musk’s attempt to block the company’s conversion to a for-profit entity. In a court filing on Friday, OpenAI argued that Musk, one of its co-founders, initially supported the move toward a for-profit structure before leaving the company due to disagreements over control and equity stake.

To bolster its case, OpenAI released a series of emails and text messages involving Musk, which it claims demonstrate that he was in favor of the company’s for-profit status. Musk, however, has since launched his own artificial intelligence firm, xAI, and filed a lawsuit against OpenAI in August, accusing the company of prioritizing profits over public benefit in its drive to advance AI.

Musk’s lawsuit also claims that OpenAI’s actions are anticompetitive, alleging that the company is working to monopolize the generative AI market and sideline rivals. He sought a preliminary injunction in November, asking U.S. District Judge Yvonne Gonzalez Rogers to block the conversion to a for-profit company, arguing that it violated contract provisions.

In response, OpenAI argued that Musk’s request is based on “unsupported allegations” and that he should focus on competing in the marketplace rather than through litigation. OpenAI also denied any conspiracy to restrain competition, emphasizing that it operates independently from Microsoft, which has heavily invested in the company.

Microsoft, in a separate filing, reaffirmed that it and OpenAI are independent entities that compete with each other and other companies, fueling innovation in the AI sector.

OpenAI, originally founded as a nonprofit in 2014, has become a major player in generative AI, with substantial backing from Microsoft. In October, OpenAI raised $6.6 billion in funding, boosting its valuation to $157 billion. Musk’s xAI, launched earlier this year, raised about $6 billion in equity financing.

The planned restructuring of OpenAI will transition it into a for-profit benefit corporation, with the nonprofit holding a minority stake in the new entity. Judge Rogers is scheduled to hear arguments for Musk’s injunction on January 14.