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A New York judge on Monday questioned whether an ugly dispute centered on claims that a crypto-focused law firm ousted a partner to seize his share of a digital asset could be decided without a trial.

U.S. District Judge John Koeltl said a jury may need to assess what the consequences of an ouster from the partnership should be, noting that no such provision was made in the firm’s Memorandum of Understanding.

Jason Cyrulnik has claimed that his former firm, now Freedman Normand Friedland, ousted him to seize his agreed upon share of a crypto asset after it spiked in value. The firm has said that it removed Cyrulnik due to a pattern of abusive behavior and that the memorandum of understanding was not a finalized, binding partnership agreement.

“Shouldn’t that be a jury question?” Judge Koeltl asked of the benefits to which Cyrulnik should be entitled. The comments came during a hearing Monday on Cyrulnik’s and Freedman Norman Friedland’s separate motions for summary judgment.

The fight offers a window into the potential pitfalls of forming a boutique firm from scratch, including forming and implementing an airtight partnership agreement. It also provides a peek at the potential downstream consequences of attorneys accepting digital currencies instead of cash as a payment for their services.

Ava Labs Token

Cyrulnik’s former firm, first known as Roche Cyrulnik Freedman, launched in 2020 with a group of Boies Schiller Flexner expats and plans to specialize in emerging areas such as crypto litigation.

One of the firm’s early clients included the blockchain startup Ava Labs, which gave up a share of its soon-to-be-distributed digital tokens in exchange for legal work. Ava Labs had agreed to distribute to the firm about 2.16 million tokens, of which Cyrulnik had a 25% stake in, his counsel said Monday. He also claimed he had a 27% equity stake in the firm under the memorandum.

The firm severed ties with Cyrulnik over behavior they say impeded firm governance, but he refused to leave. Freedman Normand Friedland filed a lawsuit against Cyrulnik in 2021 seeking a declaration that the removal for abusive behavior was lawful.

The suit also claimed that the lawyer was trying to shake down the firm for money he was not entitled to.

Cyrulnik countersued, alleging that his fellow co-founders, Kyle Roche and Devin Freedman, orchestrated a scheme to remove him from the firm and take his stake after the Ava Labs coin, AVAX, dramatically surged in value, reaching as high as $59 per token in February 2021. He asked for compensatory damages, “including the value of his equity interest in the firm (inclusive of his equity interest in the tokens)” as of his removal.

That translated to about $130 million for the firm, however today the firm’s stake would be much lower. The Ava Labs coin, AVAX, was being traded on Monday at just below $13, according to CoinMarketCap.

The firm argued on Monday that the memorandum Cyrulnik used to support his claims was an “obligation to continue to negotiate in good faith,” rather than a binding agreement.

Freedman Normand Friedland today has 17 attorneys based largely in New York and Miami, according to its website. Roche, one of its founding partners, left the firm in October 2022 after a website named Crypto Leaks posted secret recordings of him talking about targeting rivals of Ava Labs through litigation.

Roche and the firm have denied this, but the recording led to the firm’s removal from multiple cases, including a class action targeting crypto exchange Bitfinex and Tether, the issuer of the USDT stablecoin.

Shapiro Arato Bach and Freedman Normand Friedland represented the firm in Monday’s hearing. Kasowitz Benson Torres represented Cyrulnik.

The case is Roche Freedman LLP v. Cyrulnik, S.D.N.Y., No. 21-CV-1746, 11/06/2023.


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