Went through the complaint and here are my initial thoughts:
The securities claims are being made under federal law, not state law - so the Howey Test (federal securities precedent) and not Silent Hill (California State securities precedent) would be the guiding principle. (see http://bit.ly/2uw60Hd for a quick overview)
Under the Howey test, there are four elements that must be present for it to be a security. There is a clear (one may say, convincing) argument against two of those elements, and a potentially convincing case for a third.
1 - The “security” must have a clear expectation of profit: The Breitman’s have said over and over again that this is a “donation”… regardless of Tim Draper saying he “invested”… those who represented DLS and the Foundation said it was a donation. A reasonable person would NOT expect to profit from a donation.
2 - The “profit” must be solely from the efforts of others. IF there is a expectation of profit, it would come from the appreciation of the value of the token. IF the token appreciates in value it will be because of the fine work the ENTIRE COMMUNITY puts into it. As the token carry in them the means of their own governance - they must be leveraged (Aye, Nay, Abstain) for the network to improve in value, therefore, if someone has a token, they are participating in the network and, therefore, are contributing to the improvement of value.
3 - Slightly weaker is an attack against the existing paradigm of a “common enterprise” or “venture”. The core nature of a distributed ledger is that it is distributed, it is decentralized. Just as you can’t sue “the Internet” - you shouldn’t be able to sue a blockchain. (There are problems with this argument because (a) DLS is a corporation, (b) Tezos Foundation is a business entity, © we are all engaged in working to a common goal, a common enterprise, if you will, regardless of the lack of structure…)
The real threat of this claim is - actually - the false adverting one. Strange Brew stuck their foot in it when they claimed - rightly or wrongly - the list of companies that had “adopted” Tezos. There is always wiggle-room in how clients and customers can be claimed and there was plenty of space to be more circumspect. If the suit gets any traction at all it would be due to those claims. But there are ways to remediate that and there is - in no way - cause for a punitive award for a PR guy being too enthusiastic about his clients successes.
Here’s the thing - over and over again the complaint mentions the fact that Tezos raised $400M (which isn’t true… regardless of the current value) - which, to me, means this lawyer is angling for a settlement rather than an actual trial. After all, the defendant started investing in cryptocurrency in MARCH 2017 and he used 1 whole bitcoin for his tezos donation. Not some fraction thereof - one round bitcoin. Sounds unsophisticated - like a plant, or a civil action troll.
I see “opportunist” written all over this suit and I hope and pray the judge will throw it out.