U.S. Court Unfreezes $57M in USDC Amid Libra Token Lawsuit

A U.S. federal judge has unblocked over $57 million in USDC that was previously frozen in connection with the Libra token investigation. This decision is part of an ongoing class-action lawsuit where investors are claiming more than $100 million in damages following the collapse of the Libra project.

Key Takeaways

A federal judge has released $57 million in USDC related to the Libra token.
The assets were frozen as part of a class-action lawsuit against Hayden Davis and Ben Chow.
The judge found no evidence of potential misconduct from the defendants regarding the frozen funds.
The lawsuit, seeking over $100 million, is still in its early stages, and doubts about its success linger.
Libra’s market value plummeted shortly after its launch due to accusations of a rug pull linked to endorsements, causing significant investor distress.

US court clears $57M in frozen USDC in Libra token lawsuit

The Unfreezing of Funds

In a significant development, a U.S. federal judge has released over $57 million in USDC that was previously frozen as part of the Libra token scandal investigation. The funds, initially frozen in May by Judge Jennifer L. Rochon from the Southern District of New York, were held in two wallets connected to Hayden Davis, a promoter of memecoins, and Ben Chow, the former CEO of the Meteora exchange.

This freeze was part of a class-action lawsuit wherein investors are pursuing more than $100 million in damages linked to the collapse of the Libra token.

Court's Rationale

On Tuesday, Judge Rochon stated in court that she no longer perceives Davis and Chow as potential threats who might mishandle the assets. She noted that both individuals complied with the legal guidelines throughout the case and never attempted to relocate or conceal the funds while they were frozen.

Judge Rochon commented, "It is clear that monetary damages would be available to compensate the class," emphasizing that the plaintiffs had not demonstrated any "irreparable harm" that would justify the continuation of the freeze. Additionally, she pointed out that the defendants did not act as "evasive actors," which contributed to her decision to release the funds.

Current Status of the Lawsuit

Despite the unfreezing, Judge Rochon clarified that the case is still in its preliminary stages. She expressed doubt regarding the potential success of the class-action lawsuit but stopped short of dismissing it entirely. Chow's attorney, Samson Enzer from Cahill Gordon & Reindel LLP, echoed these sentiments, describing the plaintiffs' claims as "untested and meritless" and indicating plans to file a motion to dismiss the case.

Libra was launched in February of this year, with backing from Davis' Kelsier Labs and infrastructure support from Chow’s Meteora exchange. The cryptocurrency quickly reached a market capitalization exceeding $4.56 billion, fueled by Argentine President Javier Milei’s social media promotion, which encouraged small business support.

Market Reaction and Controversy

Traders interpreted Milei’s social media endorsement as an official endorsement, which helped LIBRA soar to an all-time high of over $4 shortly after its launch. However, within 24 hours, the token lost nearly 97% of its value, leading investors to accuse Davis and Chow of executing a prominent rug pull. Some critics pointed to Milei’s initial endorsement as misleading, leading many traders to believe the Argentine government was backing the token.

Milei quickly removed his post supporting Libra and distanced himself from the project, claiming ignorance of its structure and associated risks. He characterized his promotion as a routine social media update, a defense that did not halt a congressional ethics investigation.

Subsequent to the launch, a congressional ethics probe was initiated against Milei, and lawmakers pushed for impeachment proceedings. Nonetheless, Milei eventually terminated the investigation and dissolved the task force.

As the situation unfolded, Davis became a central figure in the scandal, later attempting to rebrand himself as the steward of Libra’s funds and an advisor to Milei. However, this strategy only intensified public backlash against him. Meanwhile, Chow was compelled to resign from his position at the decentralized exchange Meteora due to poor judgment in trusting Davis.

As it stands, Judge Rochon’s decision to unfreeze the funds provides a temporary respite for the defendants. Still, the fallout from the Libra collapse looms over investors seeking compensation.