Legal Battle Intensifies: Sun Yuchen Seeks Sanctions Over Jurisdiction Dispute

A cryptocurrency investment lawsuit has taken a contentious turn with the filing of a sanctions motion. On November 4th, Sun Yuchen, along with entities Blue Anthem and Black Anthem, submitted the motion to the U.S. District Court for the Northern District of California, targeting World Liberty Financial and its legal counsel.

Central Allegation: Inconsistent Corporate Disclosures

The underlying lawsuit was initiated in April of this year. The plaintiffs allege that World Liberty Financial engaged in fraud through a November 2024 token purchase agreement, inducing them to invest tens of millions of dollars in $WLFI tokens.

The issue of court jurisdiction quickly became pivotal. The plaintiffs contend that World Liberty’s initial corporate disclosure, filed on June 2nd, listed only a single member entity based in Florida. A supplemental disclosure filed on August 26th, however, presented a starkly different picture.

  • Entity Count Surge: The number of declared member entities jumped from 1 to 22.
  • Complexified Citizenship: Citizenship was added for Delaware, Puerto Rico, and the United Arab Emirates.

According to the plaintiffs, this significant discrepancy in disclosures undermined the foundation for the case to be heard in federal court—diversity jurisdiction. U.S. law requires that all parties on one side of a case be citizens of different states or countries than all parties on the other side. The new information suggested overlapping citizenship, potentially voiding this requirement.

Sanctions Motion: Seeking $263K in Legal Fees

Invoking Title 28, Section 1927 of the U.S. Code, Sun Yuchen’s side filed the sanctions motion. This statute allows courts to penalize attorneys who unreasonably and vexatiously multiply court proceedings.

The motion specifies a requested sanctions amount of $263,821.20. The plaintiffs clarify that this sum represents only the legal fees incurred in opposing the defendant’s earlier motion to compel arbitration, aiming to hold the opposing side accountable for its litigation tactics.

A hearing on this sanctions motion is scheduled for December 10th at 11:00 AM. The outcome will not only decide the fate of these substantial fees but could also significantly influence the future trajectory of the case.