BitGo has been sued for $141 million by two companies linked to DWF Labs over allegations that the crypto custodian sold restricted tokens before their agreed release dates, causing losses to the sellers. According to reports from The Financial Times, DWF Maas and Falcon Digital filed the lawsuit in London's High Court, accusing BitGo of breaching private token sale agreements involving Falcon Finance (FF) and ESPORTS tokens. The companies claim the disputed sales pushed token prices lower and reduced the value of their remaining holdings, with DWF alleging there was no contractual or legal basis for the alleged early sales. DWF is now seeking $114 million in damages on the basis that BitGo's token sales resulted in direct losses through the fall in both tokens' prices.
At the center of the dispute are over-the-counter (OTC) transactions involving cryptocurrency tokens sold under contractual trading restrictions. As reported by The Financial Times, the arrangements involved an initial three-month lock-up period, followed by further vesting conditions limiting when the tokens could be sold. The plaintiffs allege BitGo disposed of tokens before the restrictions expired, violating the terms attached to the purchases. The agreements reportedly involved discounted token transactions, with the plaintiffs arguing that BitGo failed to honor the restrictions governing when acquired tokens could enter the market. According to the latest reports, DWF alleges BitGo bought the assets at a discount in exchange for accepting three-month lock-ups and further vesting restrictions, with the discount being conditional on the tokens remaining locked. DWF claims BitGo transferred its Falcon Finance and ESPORTS tokens to exchanges around two months before the first scheduled unlock.
DWF Labs has provided specific market data demonstrating the alleged impact of BitGo's early token sales. According to The Financial Times, Falcon Finance fell from around $0.08 in early March to $0.07 by late April, while ESPORTS dropped from approximately $0.28 in mid-March to about $0.07 by early June. DWF alleges that BitGo transferred its Falcon Finance and ESPORTS tokens to exchanges around two months before the first scheduled unlock, with the Falcon Finance sales unexpectedly flooding a market with limited liquidity and concentrated holdings. The firm argues that the lock-up agreements were designed to provide time to develop and launch products intended to improve the tokens' liquidity.
The lawsuit involves DWF Labs, which bought $25 million of WLFI tokens last year, the native asset of World Liberty Financial, the cryptocurrency project backed by President Donald Trump and his family. According to CoinDesk, this investment has drawn concern from some lawmakers in Washington, D.C. over DWF's founder Andrei Grachev's alleged links to Russia. Grachev was CEO of crypto exchange Huobi's Russian arm between 2018 and 2019, during which Huobi has been sanctioned in various jurisdictions for helping Russia evade Western sanctions. DWF raised the issue with BitGo in April and May but pursued legal action after the company did not provide an undertaking.
According to the plaintiffs, the alleged breach affected their remaining token holdings because selling large quantities before the agreed dates placed downward pressure on market prices. The companies argue that the restrictions were part of the original OTC arrangements and that their violation caused financial damage. Their requested compensation is based on the losses they attribute to BitGo's conduct, with DWF claiming the transactions caused direct financial losses on its remaining token holdings. The $141 million represents the damages requested by the plaintiffs, not a court-ordered payment or an independently established valuation of the alleged losses.
BitGo declined to comment on the allegations, which have not been established as facts by the court. According to The Financial Times, the publicly accessible reports do not establish the full quantities sold, the prices received by BitGo, or the exact dates of each disputed transaction. Those details would be necessary to compare the alleged trading activity with the contractual release schedules. Neither DWF nor BitGo immediately responded to CoinDesk's request for comment. The case has drawn attention to the private token transactions conducted by firms involved in cryptocurrency market making, with DWF Labs, founded in 2022, operating in digital asset trading and investment.
