Bitget Exchange sued by ReelStar Token Project advisor over failed listing

Bitget Exchange sued by ReelStar Token Project advisor over failed listing

The Thorny Path to Success: Unraveling the Blockchain Industry

Introduction

The blockchain industry is not an easy road to navigate, as seen in the recent lawsuit involving Evan Luthra, a prominent crypto influencer. Luthra is suing the exchange platform, Bitget, for freezing his holdings in REELT, a token he was promoting. This case raises several issues within the blockchain industry, including the challenges faced by small-cap tokens, the volatility of token prices, and the role of influencers in token promotions.

Evan Luthra: The Influencer and the Token

Evan Luthra, a well-known figure in the crypto community, claims to have advised numerous token projects and invested in hundreds of them. He was hired as an advisor by ReelStar, a startup that raised $5 million in an Initial Coin Offering (ICO) in 2022. ReelStar aimed to create a creator-oriented social media app where content producers would be rewarded with cryptocurrencies.

As part of his advisory role, Luthra received 150 billion REELT tokens over 12 months. Before the token’s listing, Luthra had received 7.5 million tokens, of which he sold 1.3 million on Bitget. He also sold some tokens on other exchanges without any issues.

The Lawsuit: Unlawful Denial and Poisoned Relationships

After Luthra sold his tokens on Bitget, the exchange froze his account, leading to a lawsuit. Luthra claims Bitget unlawfully denied him access to his account and damaged his relationship with the ReelStar project. As a result, the project terminated Luthra’s advisory contract and denied him the remaining tokens he was owed.

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This case sheds light on the challenges faced by small-cap tokens. These tokens often experience a significant drop in price after listing, causing losses for early buyers.

Foiled Listing: The REELT Token’s Price Plunge

REELT was listed on Bitget on March 23. However, within the first few hours, the token’s price plummeted due to massive sales. On opening day, the token’s price dropped from $0.12 to $0.02. Bitget halted trading in REELT the following day, as several accounts, including Luthra’s, were observed dumping tokens.

According to Bitget, the accounts sold over 2 million REELT tokens, causing the price to decrease by over 60%. The exchange decided to delist the token and compensate users who bought it on their platform. Bitget later refunded 583 users.

The project also requested other exchanges to stop trading REELT, citing significant price discrepancies and potential price manipulation by bad actors. The exact reasons behind the token’s price plunge are still under investigation.

Advisor’s Share: Ethical Concerns and Allegations of Misconduct

Bitget accused Luthra of acting in bad faith and attempting to manipulate the token’s price. Luthra defends his actions, stating that he obtained permission from ReelStar’s CEO, Navdeep Sharma, to sell his tokens. However, Bitget argues that Luthra’s behavior was unethical, comparing it to shilling a coin with influence and then dumping it on followers.

The Bitget spokesperson, Jing Zhang, emphasizes the importance of ethical behavior within the industry and suggests that Luthra’s actions may constitute an exit scam. The freezing of Luthra’s account has not only resulted in the loss of crypto assets but has also terminated his advisory contract, depriving him of the remaining tokens he was owed.

Lessons Learned and Ongoing Discussions

The ReelStar team declined to comment on the matter, citing ongoing negotiations with Bitget. However, it is evident that this case exposes some of the pitfalls faced by smaller token projects. The coordination between market makers, token issuers, and exchanges plays a crucial role in maintaining a healthy market for new tokens.

According to Alexey Andryunin, founder and CEO of Gotbit, market makers often obtain token loans to provide liquidity during listing, only to dump the tokens immediately afterward. This strategy allows market makers to profit from the price drop and return the loaned tokens, potentially harming the project’s market.

Bitget maintains that it is willing to find a solution and rebuild trust with the ReelStar team. However, the lack of cooperation from the project has hindered progress. Bitget has compensated affected users and completed its compensation plan. Meanwhile, Luthra seeks resolution for the freeze on his account and the termination of his advisory contract.

Conclusion

The blockchain industry is not immune to challenges, as demonstrated by the ReelStar and Bitget dispute. This case highlights the volatility of token prices, the ethical responsibilities of influencers, and the need for better coordination among market makers, token issuers, and exchanges. As the industry continues to evolve, it is crucial to learn from these experiences and strive for transparency and integrity.

Disclaimer: This article provides an analysis and overview of recent events in the blockchain industry. The content is for informational purposes only and should not be considered as financial or legal advice.