Safex Foundation, Inc. v. Safeth, Ltd. ( 2021 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SAFEX FOUNDATION, INC., et al.,
Plaintiffs, Civil Action No. 21-cv-161
v. Chief Judge Beryl A. Howell
SAFETH, LTD., et al.,
Defendants.
MEMORANDUM OPINION
Plaintiffs Daniel Dabek, Safex Foundation, Inc., and Safe Exchange Foundation, LLC,
seek a preliminary injunction “to enjoin Defendants Safeth, Ltd., Joseph Lathus, and Cynthia
Lathus from infringing on Plaintiffs’ trademarks and from disseminating written or oral
statements that Safex or Mr. Dabek are engaged in a ‘scam’ or any other criminal activity.” Pl.’s
Mot. Prelim. Inj. (“Pls.’ Mot.”) at 1, ECF No. 4. Plaintiffs develop cryptocurrencies and a
cryptocurrency-based e-commerce platform, and allege that defendants, who are proceeding pro
se in this action, have infringed plaintiffs’ trademark, used the trademark to market their own
competing cryptocurrency and cryptocurrency-based e-commerce exchange, and have defamed
plaintiffs by publicly stating both that plaintiffs are infringing defendants’ trademark, and that
plaintiffs are engaged in criminal activity.1 On January 27, 2021, following a hearing on January
26, 2021, at which plaintiffs and defendants both participated, see Min. Entry (Jan. 26, 2021), a
temporary restraining order was entered enjoining defendants from infringing on plaintiffs’
1
Defendants were repeatedly advised that corporate defendant Safeth, Ltd., as a limited company, “must be
represented by counsel in this matter,” Min. Order (Jan. 25, 2021) (citing Greater Se. Cmty. Hosp. Found. v. Potter,
586 F.3d 1, 4 (D.C. Cir. 2009)); see also Min. Order (Feb. 3, 2021); Hr’g Tr. at 4:24–5:15 (Jan. 26, 2021), ECF No.
22, yet no counsel has entered an appearance for defendant Safeth, Ltd., more than nine weeks after the initiation of
the instant lawsuit. Plaintiffs accordingly filed an Affidavit for Default, ECF No. 26, against defendant Safeth, Ltd.,
and the Clerk of the Court has entered a default against this defendant, see Entry of Default, ECF No. 29.
1
trademark and from publicly stating that plaintiffs were infringing on defendants’ trademark.
See Amended Temporary Restraining Order (Jan. 27, 2021), ECF No. 20. The status quo
remains largely unchanged since the entry of the temporary restraining order. Since then,
defendants have failed to file on the docket an opposition to plaintiffs’ motion for a preliminary
injunction, and no counsel for any of the three defendants has entered an appearance.2 Plaintiffs’
only additional submission since the January 26, 2021 hearing and the entry of a temporary
restraining order is a supplemental declaration of plaintiff Daniel Dabek. See Supp. Decl. of
Daniel Dabek (“Dabek Suppl. Decl.”), ECF No. 28. For the following reasons—largely the
same reasons for which plaintiffs’ Motion for a Temporary Restraining Order, ECF No. 4, was
granted in part and denied in part—plaintiffs’ Motion for a Preliminary Injunction is granted in
part and denied in part.
I. BACKGROUND
Review of the procedural background of the instant lawsuit follows discussion of
plaintiffs’ relevant factual allegations against defendants.
A. Safex Develops Cryptocurrencies and a Cryptocurrency-Facilitated Online
Marketplace
Plaintiffs Safex Foundation, Inc. and Safe Exchange Foundation, LLC (together “Safex”)
were founded by plaintiff Dabek in 2015, with their principal place of business in Washington,
D.C. Decl. of Daniel Dabek (“Dabek Decl.”) ¶¶ 3, 124. Safex has launched three separate
cryptocurrencies, Safe Exchange Coin, Safex Tokens and Safex Cash. See id. ¶ 4. In November
2015, Safex conducted a sale of its first cryptocurrency, Safe Exchange Coin, id. ¶ 13, and
2
Notwithstanding the Court’s instruction otherwise, see Min. Order (Jan. 25, 2021), defendant Joey Lathus
has since sent multiple emails to Chambers, none of which appears to be an “opposition” but which consist mainly
of links to other online materials, attached screenshots, and additional accusations of criminal activity against
defendants. The Court directed that these emails be docketed under seal. See Min. Order (Mar. 26, 2021); Sealed
Document, ECF No. 30.
2
launched its second and third currencies, Safex Tokens, in September 2018, see id. ¶¶ 17–18.
Then, in December 2020, Safex launched Safex Marketplace, an e-commerce platform where
consumers would be able to buy and sell goods and services using Safex Cash. Id. ¶¶ 5, 18.3 In
addition to selling cryptocurrencies and developing its marketplace, Safex presents educational
events, owns and operates a website, blog, and forum, and is active on social media, including
Twitter, Facebook, and YouTube. See id. ¶¶ 6–12.
Safex has been using the mark “Safex” on its websites and products since 2015, see id.
¶ 9, and has been using its logo since Dabek commissioned it in 2017, id. ¶ 20. The mark and
logo (collectively, the Safex trademark) are also used to identify Safex Cash and Safex Tokens
on so-called “listing websites,” which are online resources that provide consumers with
information about cryptocurrencies, including price information, and so-called “cryptocurrency
exchanges,” where users can actually buy and sell cryptocurrencies. Pl.’s Mem. Supp. Mot.
Prelim. Inj. (“Pls.’ Mem.”) at 5, ECF No. 4. Until the events giving rise to the instant lawsuit,
however, plaintiffs never registered the mark “Safex” or the Safex logo with the U.S. Patent and
Trademark Office (“USPTO”). See Dabek Decl. ¶¶ 62–64.
According to plaintiffs, defendant Joey Lathus began independently promoting Safex’s
cryptocurrencies in 2018 and 2019, speaking positively of Safex’s products on his YouTube and
Twitter accounts. See id. ¶¶ 44–49; see also Pls.’ Mem. at 6–7.4 Thereafter, later in 2019, he
approached plaintiff Dabek about the possibility of being hired as a paid marketing consultant,
but Dabek told Lathus that he was not interested in the offer. Dabek Decl. ¶¶ 50–51. Lathus
3
Evidently, the exchange has been renamed “The World Marketplace.” See Suppl. Decl. of Daniel Dabek
¶ 21, ECF No. 28. For clarity, it will be referred to as “Safex Marketplace,” the name used at the time of
defendants’ statements and activities that are at issue in the instant lawsuit.
4
For instance, on May 23, 2019, Lathus posted on Twitter a picture of the Safex platform, including the
Safex logo, and stated that Safex has a “BRIGHT future,” Compl. ¶ 78, ECF No. 1, and on July 4, 2019, he posted
on Twitter, “YOULL KICK YOURSELF HARD IF YOU DON’T OWN” Safex, and declared himself “All in on
#safex $sft,” id. ¶ 79.
3
continued his attempts to be hired as a marketing consultant for Safex’s products, id. ¶ 52, but,
according to plaintiffs, soon shifted his strategy and decided to begin competing with Safex and
“to steal the Safex Trademark[] and to disseminate defamatory statements about [Dabek] and
Safex.” Id. ¶¶ 53–55.
B. Defendants Allegedly Infringe Plaintiffs’ Trademark and Begin Developing
Products to Compete with Plaintiffs’
In late 2019, defendants created Safeth Ltd., designed to create a cryptocurrency to
compete with Safex’s two currencies, which cryptocurrency Safeth called “Safex Platinum.” See
id. ¶ 57; Pls.’ Mem. at 8. Safeth created a website, whose name and address includes “Safex,” in
order to market Safex Platinum and also advertised the cryptocurrency on social media,
including Facebook, Twitter, LinkedIn, and YouTube, using the mark “Safex Platinum” and a
logo that bears a nearly identical resemblance to Safex’s logo, with only the color of the logo
noticeably different. Dabek Decl. ¶¶ 57–61; see also id. ¶ 55 (visual comparison of the
respective Safex and Safeth logos). At the same time, Safeth also announced the development of
a marketplace, called “Safex Platinum Market Place,” which was functionally similar to Safex
Marketplace. Id. ¶¶ 57, 88; see also Pls.’ Mem. at 8. Further, Safeth issued a “white paper,”
akin to a prospectus for potential cryptocurrency purchasers, that closely resembles a “blue
paper,” also like a prospectus, written by plaintiffs for their Safex currencies. See Dabek Decl.
¶¶ 79–89 (highlighting similarities between the language of plaintiffs’ blue paper and that of
defendants’ white paper).
On July 17, 2020, defendants filed a trademark application at the USPTO for “Safex
Platinum” and the Safex Platinum logo, which application remains pending. Dabek Decl. ¶ 62;
Pls.’ Mem. at 9; see also Dabek Decl., Ex. R, July 17, 2020 Trademark/Service Mark
Application, No. 90058254, ECF No. 4-19. In their USPTO application, defendants stated that
4
the trademark’s first use in commerce was in December 2019. Dabek Decl. ¶ 63. In November
2020, a USPTO examiner alerted defendants to a defect in the application, and they submitted a
revised application in December 2020, which again stated that the trademark’s first use in
commerce was in December 2019. See id. ¶ 95; Pls.’ Mem. at 9; see also Dabek Decl., Ex. BB,
Dec. 30, 2020 Response to Office Action, No. 90058254, ECF No. 4-29.
Meanwhile, plaintiffs filed a USPTO trademark application of their own for the Safex
trademark on December 24, 2020. Dabek Decl. ¶ 42; see also id., Ex. P, Dec. 24, 2020
Trademark/Service Mark Application, No. 90410526, ECF No. 4-17. Five days later, on
December 29, 2020, they mailed defendants a cease and desist letter, requesting that defendants
cease (1) infringing plaintiffs’ trademark, (2) publicly stating that plaintiffs were infringing
defendants’ trademark, (3) making misrepresentations to the USPTO, and (4) making other
defamatory statements about plaintiffs. Dabek Decl. ¶¶ 92–94; see also id., Ex. AA, Dec. 29,
2020 Letter from Joseph B. Evans to Joey Lathus et al. (“Cease and Desist Letter”) at 1–2, ECF
No. 4-28. The letter demanded a response by January 8, 2021, see Cease and Desist Letter at 2,
but defendants furnished no response, Dabek Decl. ¶ 96, although social media accounts that
plaintiffs allege belong to defendants posted publicly about the cease and desist letter, id. ¶¶ 97–
99.5
C. Defendants Allegedly Mount a Campaign Against Plaintiffs and Their
Products
Plaintiffs allege that defendants have used their pending trademark application to attempt,
sometimes successfully, to disadvantage Safex and its products. Specifically, defendants have
supposedly relied on allegations of trademark infringement to convince Twitter to suspend
5
At the January 26, 2021 hearing on plaintiffs’ Motion for a Temporary Restraining Order, ECF No. 4,
defendants denied that any of these accounts were theirs. See Hr’g Tr. 40:20–41:14.
5
Dabek’s account on that website, which inhibited Safex’s ability to advertise the launch of its
currencies and marketplace. Id. ¶¶ 76–78. Defendants have also allegedly relied on their
pending trademark application, and allegation that plaintiffs are infringing that trademark, to
convince the cryptocurrency listing website CoinGecko to delist Safex currencies. Id. ¶¶ 65–68,
70–72; Pls.’ Mem. at 10–11. Additionally, defendants have allegedly attempted to use the
allegation of trademark infringement to convince the cryptocurrency exchange Livecoin to delist
Safex currencies, such that potential cryptocurrency customers would be unable to buy or sell
Safex’s currencies on Livecoin. Dabek Decl. ¶¶ 69, 71, 74–75.
In addition, plaintiffs allege that defendants have posted online that Safex is a “scam” or
an “exit scam,” in which Safex is a ploy to sell Safex cryptocurrencies to users with the promise
that the currency will have certain functionalities and the hope that it will reach certain
valuations, and then abandon development of the currency while absconding with the money that
was raised through the cryptocurrency sales. Id. ¶¶ 104, 108–11. Plaintiffs have provided
Twitter posts from accounts they claim are controlled by defendants, referring to “safex exit
scam,” and warning others not to buy Safex’s cryptocurrencies. Id. ¶¶ 109–11; see also infra
note 12. Furthermore, defendants have also posted online suggesting that Safex Marketplace is
akin to Silk Road or AlphaBay, both notorious “dark web” marketplaces primarily used for
illegal transactions in, for example, illegal drugs, weapons, human trafficking, and murder for
hire. Id. ¶¶ 113–15; see also infra note 12. Specifically, defendant Joey Lathus suggested that
Safex Marketplace bore a resemblance to those websites due to the anonymity of Safex
Marketplace and Safex Cash. See Dabek Decl. ¶¶ 113–14.
In a series of emails with which he has peppered the Court and plaintiffs’ counsel since
the initiation of the instant lawsuit, see Sealed Document (“Mar. 26, 2021 Emails”), ECF No. 30,
6
defendant Joey Lathus has provided insight into the basis for his claims that Safex is an exit
scam and that Safex Marketplace will facilitate illegal transactions. Specifically, according to
defendant, plaintiff Dabek, the founder of Safex, until recently lived and worked in Belgrade,
Serbia, where he was the lead developer of a cryptocurrency called Dascoin. Id. Dascoin was
ultimately deemed to be a scam, however, and was subject to enforcement actions in Canada and
Poland. See id. Thus, Lathus argues, because of Dabek’s past involvement with the
development of a scam cryptocurrency, and because of certain similarities he observes between
Dascoin and Safex’s cryptocurrencies, Safex may also be a scam. In support of his comparison
of Safex Marketplace to Silk Road and Alphabay, Lathus has provided the Court with numerous
screenshots showing anonymous social media users speculating, predicting, or even celebrating
that, due to the anonymity that characterizes both the Safex Marketplace itself and the
cryptocurrencies that will be used to facilitate sales on the platform, Safex Marketplace may
facilitate the sorts of illegal transactions that flourished on Silk Road and Alphabay. See id.
D. Procedural Background
Plaintiffs initiated the instant lawsuit on January 18, 2021, alleging trademark
infringement under the Lanham Act, 15 U.S.C. § 1125(a), see Compl. ¶¶ 186–95, ECF No. 1
(Count One); common law trademark infringement, see id. ¶¶ 199–207 (Count Two); defamation
per se, see id. ¶¶ 208–15 (Count Three); false light invasion of privacy, see id. ¶¶ 216–23 (Count
Four); and unfair competition, see id. ¶¶ 224–33 (Count Five). Plaintiffs seek a permanent
injunction of plaintiffs’ trademark infringement and defamation, a declaratory judgment that
defendants have infringed their trademark, damages, and attorneys’ fees. See id. at 38–39.
On the same day, plaintiffs filed a motion for a temporary restraining order and a
preliminary injunction. See Pls.’ Mot. Plaintiffs sought to enjoin defendants from engaging in
three behaviors: (1) infringing on the Safex trademark; (2) publicly stating or otherwise
7
representing that they own the Safex trademark or that Safex was infringing Safeth’s trademark;
and (3) making defamatory statements about defendants, including that Safex is an exit scam and
that Safex Marketplace is a dark web illicit marketplace akin to Silk Road or Alphabay. See
Compl. at 38; see also Pls.’ Mem. at 3.
On January 26, 2021, at a hearing held on plaintiffs’ motion for a temporary restraining
order, defendants represented themselves pro se. See Min. Entry (Jan. 26, 2021).6 Plaintiffs’
motion for a temporary restraining order was granted in part and denied in part, based on a
determination that plaintiffs met the requirements for temporary injunctive relief as to
defendants’ alleged trademark infringement and their public statements that plaintiffs were
infringing defendants’ trademark, but not as to defendants’ allegedly defamatory statements that
Safex was an exit scam and that Safex Marketplace would facilitate illegal transactions. See
Hr’g Tr. at 74:6–75:1 (Jan. 26, 2021), ECF No. 22. Specifically, the Court found that plaintiffs
had not met their burden to establish that they would likely prevail on their defamation claim
based on defendants’ statements accusing plaintiffs of criminal behavior, because plaintiffs had
not demonstrated that they would likely be able to prove that defendants’ statements were false
and, in fact, had not addressed the truth or falsity of defendants’ statements at all. See id. at
67:11–22.
Accordingly, a temporary restraining order was entered enjoining defendants from (1)
“[u]sing in commerce or in connection with any good or service plaintiffs’ ‘Safex’ mark and
logo,” including any “mark, name, or design that creates a likelihood of confusion with
6
Although defendants had not filed a formal opposition to plaintiffs’ Motion for a Temporary Restraining
Order, between January 20, 2021 and January 25, 2021, defendant Joey Lathus sent the Court nine emails, which the
Court docketed under seal. See Sealed Document, ECF No. 15. Nearly all of the emails included links to third party
websites and attached image files, consisting primarily of screenshots of online news articles and social media posts.
Thus, although defendants did not file a formal opposition, they made their views known, at least as to some of the
claims of the Complaint, primarily relating to plaintiffs’ allegations of defamation.
8
plaintiffs’ ‘Safex’ mark and logo”; (2) “[d]isseminating, on . . . [any] public forums, any written
or oral statements that plaintiffs are infringing upon defendants’ trademarks”; and (3)
“making . . . misrepresentations to the U.S. Patent and Trademark Office” concerning
defendants’ infringing trademark. Amended Temporary Restraining Order at 1–2. The
temporary restraining order would “remain in effect pending this Court’s ruling on plaintiffs’
Motion for a Preliminary Injunction,” id. at 2, the Court “having determined that there is good
cause for an extension” of the temporary restraining order beyond the ordinary 14-day limit,
Min. Order (Feb. 3, 2021).
Plaintiffs’ Motion for a Preliminary Injunction is now ripe for resolution.
II. LEGAL STANDARD
A preliminary injunction “is a stopgap measure, generally limited as to time, and
intended to maintain a status quo or ‘to preserve the relative positions of the parties until a trial
on the merits can be held.’” Sherley v. Sebelius, 689 F.3d 776, 781–82 (D.C. Cir. 2012) (quoting
Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981)). To obtain relief, the moving party must
establish that (1) they are “likely to succeed on the merits”; (2) they are “likely to suffer
irreparable harm in the absence of preliminary relief”; (3) “the balance of equities” is in their
“favor”; and (4) “an injunction is in the public interest.” Winter v. Nat. Res. Def. Council, 555
U.S. 7, 20 (2008); see also League of Women Voters of the U.S. v. Newby, 838 F.3d 1, 6 (D.C.
Cir. 2016); Pursuing Am.’s Greatness v. FEC, 831 F.3d 500, 505 (D.C. Cir. 2016). The first
factor is the “most important factor,” Aamer v. Obama, 742 F.3d 1023, 1038 (D.C. Cir. 2014);
see also Munaf v. Geren, 553 U.S. 674, 690 (2008) (“[A] party seeking a preliminary injunction
must demonstrate, among other things, ‘a likelihood of success on the merits.’” (quoting
Gonzales v. O Centro Espirita Beneficente União do Vegetal, 546 U.S. 418, 428 (2006))), and
9
failure to show likelihood of success on the merits is alone sufficient to defeat a motion for a
preliminary injunction, see Ark. Dairy Co-op Ass’n, Inc. v. USDA, 573 F.3d 815, 832 (D.C. Cir.
2009) (citing Apotex, Inc. v. FDA, 449 F.3d 1249, 1253–54 (D.C. Cir. 2006)).7 A preliminary
injunction “is an extraordinary . . . remedy, one that should not be granted unless the movant, by
a clear showing, carries the burden of persuasion” on each of the four factors. Mazurek v.
Armstrong, 520 U.S. 968, 972 (1997) (per curiam) (emphasis omitted) (quoting 11A C. WRIGHT,
A. MILLER, & M. KANE, FEDERAL PRACTICE AND PROCEDURE § 2948, at 129–30 (2d ed. 1995));
see also Sherley, 644 F.3d at 392 (citing Winter, 555 U.S. at 22); Dorfmann v. Boozer, 414 F.2d
1168, 1173 (D.C. Cir. 1969) (“The power to issue a preliminary injunction, especially a
mandatory one, should be ‘sparingly exercised.’” (quoting 7 J.W. MOORE, FEDERAL PRACTICE
¶ 65.04(1), at 1627 (2d ed. 1968))).
III. DISCUSSION
Plaintiffs seek to preliminarily enjoin defendants from infringing the Safex trademark and
from defaming plaintiffs, in the form of statements that plaintiffs are in fact infringing
defendants’ trademark and that plaintiffs are engaged in criminal or otherwise wrongful activity.
These requests for injunctive relief are considered in turn.
7
The D.C. Circuit has previously followed a “sliding scale” approach to evaluating preliminary injunctions,
but that approach is likely inconsistent with Winter, see Archdiocese of Wash. v. Wash. Metro. Area. Transit Auth.,
897 F.3d 314, 334 (D.C. Cir. 2018 (observing that Winter may be “properly read to suggest a ‘sliding scale’
approach to weighing the four factors be abandoned”); Davis v. Pension Benefit Guar. Corp., 571 F.3d 1288, 1296
(D.C. Cir. 2009) (Kavanaugh, J., concurring) (noting that “this Circuit’s traditional sliding-scale approach to
preliminary injunctions may be difficult to square with the Supreme Court’s recent decisions in” Winter and Munaf),
and therefore will not be employed here, see Open Tech. Fund v. Pack, 470 F. Supp. 3d 8, 16 n.6 (D.D.C. 2020);
Singh v. Carter, 185 F. Supp. 3d 11, 16–17 (D.D.C. 2016).
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A. Plaintiffs’ Trademark Infringement Claim
The four preliminary injunction factors are analyzed with respect to plaintiffs’ request to
enjoin defendants from their alleged trademark infringement, beginning with the first factor,
likelihood of success on the merits, and then proceeding to the remaining three factors.
1. Likelihood of Success on the Merits
To succeed on their trademark infringement claim, plaintiffs will need to show that (1)
they own a valid trademark; (2) their trademark is distinctive or has acquired a secondary
meeting; and (3) there is a substantial likelihood of confusion between the plaintiffs’ mark and
the alleged infringer’s mark. See Am. Soc’y for Testing & Materials v. Pub. Resource Org., Inc.,
896 F.3d 437, 455–56 (D.C. Cir. 2018); Sears, Roebuck & Co v. Sears Fin. Network, 576 F.
Supp. 857, 861 (D.D.C. 1983).
First, to show ownership of trademark, plaintiffs must show that they were the first to use
the mark in commerce. See United States v. Steffens, 100 U.S. 82, 85 (1879); see also, e.g.,
Lyons v. Am. Coll. of Veterinary Sports Med. & Rehab., 859 F.3d 1023, 1027 (Fed. Cir. 2017).
Second, to show that a trademark is distinctive or has secondary meaning, plaintiffs can
demonstrate that their claimed trademark is “arbitrary,” meaning that it is a term that “is
commonly used in the language, but has no intrinsic connection to the product,” Blinded
Veterans Ass’n v. Blinded Americans Veterans Found., 872 F.2d 1035, 1040 (D.C. Cir. 1989), or,
alternatively, that it is a “fanciful” term, meaning that it is “coined for the purpose of serving as a
trademark,” id. Both “arbitrary and fanciful terms are inherently distinctive,” such that “they are
protectable without proof of secondary meaning.” Id. Third, to show confusion, plaintiffs must
demonstrate “that numerous ordinary prudent purchasers are likely to be misled or confused as to
the source of the product in question because of the entrance in the marketplace of [the alleged
infringer’s] mark.” Gruner + Jahr USA Publ’g v. Meredith Corp., 991 F.2d 1072, 1077 (2d Cir.
11
1993) (quoted in Am. Soc’y for Testing & Materials, 896 F.3d at 456); see also Sears, Roebuck,
576 F. Supp. at 863 (explaining that confusion requires that the trademark and alleged infringing
trademark be “sufficiently similar to create the probability that some consumers might believe
that the two marks originated from the same source or that some consumers might mistake one
mark for the other when seeing or hearing the mark alone”). Plaintiffs have shown likelihood of
success as to all three prongs.
a. Ownership of the Safex Trademark
First, plaintiffs have shown likelihood of success as to ownership of the Safex trademark.
Neither plaintiffs nor defendants has registered their respective trademark and both sides have
pending trademark applications before the USPTO. These facts are not dispositive of ownership
because the Lanham Act protects unregistered trademarks in addition to registered trademarks.
See 15 U.S.C. § 1125(a); see also Paleteria La Michoacana, Inc. v. Productos Lacteos Tocumbo
S.A., 743 Fed. App’x 457, 462 (D.C. Cir. 2018) (“The Lanham Act provides a right of action for
[trademark infringement] in relation to both registered and unregistered marks.”). Rather,
“because use in commerce, not mere registration, is the sine qua non of a trademark right under
the Lanham Act,” id. at 463, an unregistered mark may nevertheless be protected, even when a
plaintiff seeks to enforce an unregistered trademark against an infringing defendant who has a
registered trademark. See Lyons, 859 F.3d at 1032 (upholding decision of USPTO Trademark
Trial and Appeal Board that defendant, rather than plaintiff, owned disputed trademark, even
though plaintiff had registered the trademark and defendant had not, because defendant was first
to use trademark in commerce).
The Lanham Act defines “use in commerce” as the “bona fide use of a mark in the
ordinary course of trade, and not . . . merely to reserve a right in a mark.” 15 U.S.C. § 1127.
12
Under the Lanham Act, a mark is used in commerce when the trademark is placed on
“documents associated with the goods or their sale, and . . . the goods are sold or transported in
commerce.” Id. By offering Safex Tokens and Safex Cash for sale and use for transactions to
buyers on the internet since at least 2017, see Dabek Decl. ¶¶ 20–22, 38, Safex has been using
the trademark in commerce. Furthermore, its website and marketing efforts all identify its
cryptocurrencies using the trademark, and third parties, including listing websites and
cryptocurrency exchanges also identify Safex currencies using the trademark. Id. To be sure,
Safeth also appears to have used the trademark in commerce, given that Safex Platinum had been
advertised for sale on Safeth’s website. Id. ¶¶ 55–58. Safeth had been offering Safex Platinum
for sale only since late 2019, however, and, as such, its use of the trademark is junior to Safex’s.
See id. ¶ 55. Plaintiffs have therefore demonstrated that they will likely succeed in proving that
they own the Safex trademark.
b. Distinctive and Confusion Prongs of the Trademark Infringement
Inquiry
Plaintiffs have also demonstrated likelihood of success on the merits as to the second
prong of the trademark inquiry. They have shown that their trademark is likely inherently
distinctive, because the name and logo, consisting of a made-up word and an abstract image,
possibly of a dolphin, bear no intrinsic connection to the products Safex offers using that
trademark, namely Safex’s cryptocurrencies and the Safex Marketplace. See Blinded Veterans
Ass’n, 872 F.2d at 1040. The Safex trademark is therefore an arbitrary term that is inherently
distinctive.
Finally, plaintiffs have also demonstrated that they are likely to succeed on the confusion
prong, given that defendants’ mark “Safex Platinum” includes “Safex,” suggesting that it is
connected with or developed by Safex. Further, Safex and Safeth both use the trademark to
13
designate cryptocurrencies, and Safeth’s logo is nearly a carbon-copy of Safex’s logo. In these
circumstances, where two parties use the same mark and nearly identical logos to advertise and
sell functionally similarly products, confusion is likely. See, e.g., Louis Vuitton Malletier S.A.S.
v. Guang Da Grp., Inc., No. 18-cv-2812, 2018 WL 7141337, at *1 (D.D.C. Dec. 3, 2018)
(granting temporary restraining order in trademark infringement case based, in part, on the
defendants’ use of a logo identical to plaintiffs’ to sell imitation products).
Since plaintiffs have shown that they will likely be able to prove that they were the first
to use the contested trademark in commerce, that the trademark is inherently distinctive because
arbitrary, and that confusion between the Safex trademark and defendants’ trademark is likely,
they have has satisfied all three prongs of the trademark infringement inquiry and shown that
they will likely succeed on its trademark infringement claims.
2. Irreparable Harm
Plaintiffs must also show that they will suffer irreparable harm absent a preliminary
injunction, League of Women Voters, 838 F.3d at 6, and they rightly note, Pls.’ Mem. at 30, that
“[t]rademark infringement by its very nature causes irreparable injury.” Appleseed Found. Inc.
v. Appleseed Inst., Inc., 981 F. Supp. 672, 677 (D.D.C. 1997) (citing Sears, Roebuck, 576 F.
Supp. at 864). Plaintiffs further argue that they have lost their ability to control the Safex brand
and goodwill, Pls.’ Mem. at 30–31, without distinguishing this loss from the inherent irreparable
injury caused by trademark infringement, since both this loss and injury are inextricably
intertwined. See Sears, Roebuck, 576 F. Supp. at 864 (apparently equating the irreparable harm
caused by trademark infringement with “the dilution of the distinctiveness of [plaintiff’s]
trademark, the loss of control of its reputation[,] and the diminishment of its good will”).
14
Regardless, defendants’ alleged infringement occurs at a critical time for Safex’s
products, as Safex recently launched an e-commerce marketplace and its currencies have not
been widely adopted or popular, and do not appear to be especially valuable, at least for now.
See Pls.’ Mem. at 1–2. Given their relative novelty, cryptocurrencies and their related markets
and products present a significant opportunity for unscrupulousness and, consequently, many
would-be customers are wary of new and unknown products. Against that backdrop, not
surprisingly, the reputation of a cryptocurrency, its marketers, and its development team is
crucial for the currency’s success, and reputational harms can cause serious damage to a
fledgling cryptocurrency. See Dabek Decl. ¶¶ 68–69, 71; Pls.’ Mem. at 11. Thus, plaintiffs are
particularly susceptible to the injury caused by defendants’ alleged trademark infringement.
Further bolstering the conclusion that plaintiffs face the prospect of irreparable harm
absent an injunction is evidence that plaintiffs have cited suggesting that defendants have
relished the harm that they have caused and are causing to plaintiffs. Specifically, they quote a
Facebook post in which defendant Joey Lathus claims, “Safex is dead and I killed it”; another in
which Lathus seems to celebrate that Dabek was suspended from Twitter, writing “#safex taken
from Twitter due to trademark infringement[,] [c]ompliments of Safeth”; and a third in which
defendant Cynthia Lathus writes, “Joey killed the [S]afex market before it could even begin.”
Compl. ¶ 114. These statements indicate, at a minimum, that defendants are aware that their
conduct is having deleterious consequences for Safex and further strongly suggest that
defendants will continue their conduct absent an injunction. Accordingly, plaintiffs have shown
that defendants’ alleged trademark infringement will cause them irreparable injury.
15
3. The Balance of Equities and the Public Interest
The remaining two preliminary injunction factors, the balance of equities and the public
interest, also weigh in plaintiffs’ favor with respect to their trademark infringement claim.
First, the balance of equities favors preliminary injunctive relief. Plaintiffs’ use of the
Safex trademark has occurred in the ordinary course of its business, namely, to market its
cryptocurrencies and the Safex Marketplace, and defendants’ behavior has had identifiable
detrimental effects on their ability to market successfully their cryptocurrencies. Although
defendants also appear to have used their allegedly infringing trademark in the course of a
competing business, by attempting to develop a competing cryptocurrency, the scope of their
legitimate efforts to create a currency, separate from repurposing and repackaging Safex’s work
to develop its currencies and marketplace, are unclear. Defendants’ conduct instead seems
primarily designed around harassing plaintiffs and frustrating their business efforts to turn
Safex’s products into valuable cryptocurrencies and a popular site of online, cryptocurrency-
facilitated commerce. Plaintiffs also cite other alleged bad-faith behavior by defendants,
including making personal threats against Dabek, see Dabek Decl. ¶ 121, and encouraging users
on the anonymous internet message board 4chan to attack Safex on Twitter, see id. ¶¶ 119–20.
Defendants, for their part, insinuate that Joey and Cynthia Lathus have been the object of threats
and “doxxing,” by having their identities made public, by supporters of Safex and Dabek. See
Sealed Document (“Jan. 25, 2021 Emails”), ECF No. 15; Mar. 26, 2021 Emails. Nevertheless,
despite the level of acrimony on all sides, the balance of equities tips slightly in plaintiffs’ favor.
Second, a preliminary injunction is also in the public interest. In evaluating whether an
injunction in the trademark infringement context is in the public interest, courts have noted that
“[i]t is within the public interest for the Court to take action to prevent public deception and
16
confusion over the source or origin of goods,” Delta Sigma Theta Sorority, Inc. v. Bivins, 215 F.
Supp. 3d 17, 21 (D.D.C. 2013) (citing Sears, Roebuck, 576 F. Supp. at 865), and that “[t]he
public has a right not to be deceived or confused,” Crime Control, Inc. v. Crime Control, Inc.,
624 F. Supp. 579, 582 (D.D.C. 1984). As explained, a substantial likelihood of confusion exists
given the very close similarity between plaintiffs’ trademark and the allegedly infringing
trademark being used by defendants, and the fact that the two trademarks are being used for very
similar products in the same market. Preventing this confusion is in the public interest, see Delta
Sigma Theta, 215 F. Supp. 3d at 21; Crime Control, Inc., 624 F. Supp. at 582, and the public
interest therefore favors an injunction with respect to defendants’ alleged trademark
infringement. As all four factors weigh in favor of injunctive relief as to plaintiffs’ trademark
infringement claim, plaintiffs’ request to preliminarily enjoin defendants’ infringing behavior
will be granted.
B. Plaintiff’s Defamation Claim
Plaintiffs’ request for a preliminary injunction based on their defamation claim is next
addressed. Specifically, plaintiffs seek to enjoin defendants from making two categories of
statements: (1) that plaintiffs are infringing defendants’ trademark, and (2) that plaintiffs are
engaged in criminal activity. The analysis for these two categories of allegedly defamatory
statements differs significantly, and plaintiffs have satisfied the requirements for a preliminary
injunction only as to the first category of statements. With respect to the second category of
statements, in contrast, plaintiffs have failed to demonstrate that they will likely succeed on the
merits of their defamation claim.
1. Likelihood of Success on the Merits
To succeed on their defamation and false light invasion of privacy claims, under D.C.
law, plaintiffs must show that: (1) defendants made a false and defamatory statement concerning
17
plaintiffs; (2) defendants published the statement to a third party; (3) defendants’ fault in
publishing the statement amounted to at least negligence; and (4) the statement’s publication
caused plaintiffs special harm or else was actionable as a matter of law irrespective of special
harm. Oparaugo v. Watts, 884 A.2d 63, 76 (D.C. 2005) (citing Crowley v. N. Am. Telecommc’ns
Ass’n, 691 A.2d 1169, 1173 n.2 (D.C. 1997)); see also, e.g., Farah v. Esquire Magazine, 736
F.3d 528, 533–34 (D.C. Cir. 2013).8 Regarding the third prong, because plaintiff Dabek is a
limited-purpose public figure, see infra Part III.B.1.a, plaintiffs must prove that defendants acted
with actual malice, rather than mere negligence. Kahl v. Bureau of Nat’l Affairs, Inc., 856 F.3d
106, 113 (D.C. Cir. 2017); Jankovic v. Int’l Crisis Grp., 822 F.3d 576, 589 (D.C. Cir. 2016).
Further, since “[c]ostly and time-consuming defamation litigation can threaten [the] essential
freedoms” guaranteed by the First Amendment, in order to preserve those freedoms “and give
reporters, commentators, bloggers, and tweeters (among others) the breathing room they need to
pursue the truth, the Supreme Court has directed courts to expeditiously weed out unmeritorious
defamation suits.” Kahl, 856 F.3d at 109.
The likelihood that plaintiffs will be able to demonstrate that these four factors are
satisfied is considered separately for statements that plaintiffs are infringing defendants’
trademark and statements that plaintiffs are engaged in criminal activity, following explanation
that plaintiff Dabek is a limited-purpose public figure.
8
Plaintiffs’ false light invasion of privacy claim rises or falls with their defamation claim, as the claims rely
on the same facts, see Pls.’ Mem. at 19–20, and when a plaintiff relies upon the same factual allegations to establish
both defamation and false light invasion of privacy, the D.C. Court of Appeals “analyze[s] them in the same
manner,” Armstrong v. Thompson, 80 A.3d 177, 188 (D.C. 2013); see also Conejo v. Am. Fed’n of Gov’t Emps.,
AFL-CIO, 377 F. Supp. 3d 16, 32 (D.D.C. 2019) (citing Armstrong, 80 A.3d at 188); Tah v. Global Witness Publ’g,
Inc., No. 19-7132, 2021 WL 1045205, at *8 (D.C. Cir. Mar. 19, 2021) (“[A] ‘plaintiff may not use related causes of
action to avoid the constitutional requisites of a defamation claim’ and . . . ‘[t]he First Amendment considerations
that apply to defamation therefore apply also to [plaintiffs’] counts for false light’ . . . .” (second and third alterations
in original) (quoting Farah, 736 F.3d at 540).
18
a. Plaintiff Daniel Dabek Is a Limited-Purpose Public Figure
At the outset, whether plaintiff Dabek is a limited-purpose public figure, as just noted,
has important ramifications for the law applicable to his defamation claim against defendants.
“Public figures are those who have ‘thrust themselves to the forefront of particular public
controversies in order to influence the resolution of the issues involved.’” Id. at 114 (quoting
Gertz v. Robert Welch, Inc., 418 U.S. 323, 345 (1974)). “Because of the prominent role that
those individuals have sought for themselves on certain issues, their ‘views and actions with
respect to public issues and events are often as much concern to the citizen’ as those of public
officials.” Id. (quoting Curtis Publ’g Co. v. Butts, 388 U.S. 130, 162 (1967) (Warren, C.J.,
concurring in the judgment). Since “[f]ew people ‘occupy positions’ of such ‘power and
influence that they are deemed public figures for all purposes,’” id. (quoting Gertz, 418 U.S. at
345), “[m]ore commonly, public figures exercise that degree of power and influence on a limited
range of topics or issues and are therefore known as ‘limited-purpose public figures,’” id. (citing
Jankovic, 822 F.3d at 584). The law treats such limited-purpose public figures “as public
figures, but only when it comes to the particular public controversies with which they are
associated,” id., and “set[s] the ‘dividing line between public and private figures based on those
who assumed the risk of publicity and had access to channels of communication to defend
themselves, and those who did not,” Jankovic, 822 F.3d at 584–85 (quoting Lohrenz v. Donnelly,
350 F.3d 1272, 1279 (D.C. Cir. 2003)). In setting this boundary between private persons and
limited-purpose public figures, the Supreme Court “has ‘been especially anxious to assure to the
freedoms of speech and press that “breathing space” essential to their fruitful exercise.’” Id. at
585 (quoting Gertz, 418 U.S. at 342).
19
Whether Dabek “is a limited-purpose public figure is a ‘matter of law for the court to
decide.’” Kahl, 856 F.3d at 114 (quoting Tavoulareas v. Piro, 817 F.2d 762, 772 (D.C. Cir.
1987) (en banc)); see also Jankovic, 822 F.3d at 585. A three-part test is employed to determine
whether a plaintiff is a public figure: “First, the court must decide the relevant controversy and
determine whether it is a public controversy. Second, the plaintiff must have played a significant
role in that controversy. Third, the defamatory statement must be germane to the plaintiff’s
participation in the controversy.” Kahl, 856 F.3d at 114 (quoting Jankovic, 822 F.3d at 585); see
also Waldbaum v. Fairchild Publ’ns, Inc., 627 F.2d 1287, 1296–98 (D.C. Cir. 1980) (first
articulating this three-pronged test). “In conducting this analysis, a court must be mindful that
‘the touchstone’ of the limited-purpose public figure analysis remains determining ‘whether an
individual has assumed [a] role[] of especial prominence in the affairs of society . . . [that]
invite[s] attention and comment.’” Jankovic, 822 F.3d at 585 (alterations in original) (quoting
Lohrenz, 350 F.3d at 1279). Plaintiff Dabek satisfies all three prongs of the test and so is a
limited-purpose public figure with respect to the launch of Safex’s cryptocurrencies and online
e-commerce marketplace.
First, the relevant controversy, the legitimacy and bona fides of Safex’s products, is
public. “To determine whether there is a public controversy, the court ‘must examine whether
persons actually were discussing some specific question,’” id. (quoting Waldbaum, 627 F.2d at
1297), and a “controversy is a public one when a ‘reasonable person would have expected
persons beyond the immediate participants in the dispute to feel the impact of its resolution,’” id.(quoting Waldbaum, 627 F.2d at 1297). As defendants have repeatedly noted, they are far from
the only individuals to have argued, due to Dabek’s past involvement with a cryptocurrency
subsequently revealed to be a scam and subjected to enforcement actions overseas, that Safex
20
may likewise be a scam; and, on the basis of certain features Safex Marketplace shares with Silk
Road and Alphabay, that Safex Marketplace may be used to facilitate illegal transactions just as
those latter two platforms were used. See generally Jan. 25, 2021 Emails; Mar. 26, 2021 Emails;
see also infra Part III.B.1.c.
For example, Lathus has provided the Court a link to Twitter users warning others that
Safex’s products are or may be a scam, claiming, inter alia, “If you more dip on $safex you will
find more reasons why it is $scam,” another claiming that after “2 years of dev [Safex] is still a
vaporware, CEO used paid shill and dumb shill himself to pump his coin. He purposely lies
about exchanges,” and another who writes, “This Safex update is over a month old now. I don’t
think they know what ready means. But hey, at least you can shill a scam another month!,” plus
multiple other users stating “Safex is a scam.” See Mar. 26, 2021 Emails. He has also directed
the Court’s attention to third parties noting the similarities between Safex Marketplace on the
one hand and Silk Road and Alphabay on the other. See id.; Jan. 25, 2021 Emails. For instance,
he has provided links and screenshots showing other anonymous social media users stating, inter
alia, “safex will sell crystal meth and homemade guns”; “I just want to buy drugs anonymously
and tax free on a decentralized marketplace on its own blockchain, and with its own mineable
currency. Maybe Safex one day”; “[on] Safex you will be able to buy all the cocaine and hookers
you want.”; and “Safex is going to be like alphabay . . . the only difference is that it cannot be
taken down.” Jan. 25, 2021 Emails; see also infra note 11 and accompanying text.
Thus, the legitimacy of Safex’s cryptocurrencies and the Safex Marketplace is plainly a
question that “persons actually were discussing” online. Jankovic, 822 F.3d at 585 (quoting
Waldbaum, 627 F.2d at 1297). Defendants, of course, are involved in this debate, and their
participation therein is a principal catalyst for the instant lawsuit, yet the fact that defendants are
21
participants in the controversy does not diminish the fact that such controversy actually exists
and is public. Moreover, the controversy is also such that “persons beyond the immediate
participants in the dispute” will likely “feel the impact of its resolution,” id. (quoting Waldbaum,
627 F.2d at 1297), because anybody who has purchased or is considering purchasing Safex’s
cryptocurrencies has an obvious interest in the resolution of the issue of whether Safex’s
products are legitimate. Accordingly, the public-controversy prong of the limited-purpose public
figure analysis is satisfied.
Second, Dabek has “‘thrust’ himself to the ‘forefront’ of” this public controversy and has
therefore had “the necessary impact” on the controversy. Jankovic, 822 F.3d at 586 (quoting
Waldbaum, 627 F.2d at 1297 n.27); see also Kahl, 856 F.3d at 115 (“Limited-purpose public
figures have ‘thrust themselves to the forefront’ of a public controversy ‘in order to influence the
resolution of the issues involved.’” (quoting Gertz, 418 U.S. at 345)). Here, the Court is
particularly “mindful that ‘the touchstone’ of the limited-purpose public figure analysis” is
determining “‘whether [Dabek] has assumed [a] role[] of especial prominence in the affairs of
society . . . [that] invite[s] attention and comment.’” Jankovic, 822 F.3d at 585 (second, third,
fourth, and fifth alterations in original) (quoting Lohrenz, 350 F.3d at 1279). He has. Dabek is
obviously at the center of this controversy, since the public debate over whether his company and
products are trustworthy flow directly from the suspicion, based on his personal involvement
with Dascoin, that Dabek himself is not trustworthy. See Waldbaum, 627 F.2d at 1297 (noting
that plaintiff “must have achieved a ‘special prominence’ in the debate” (quoting Gertz, 418 U.S.
at 351)).
Moreover, Dabek has a robust public online presence aimed directly at promoting, and
thereby implying the legitimacy of, Safex’s products. Since at least 2017, Dabek has issued a
22
stream of social media posts and press releases promoting Safex’s products, and has also spoken
as an expert at conferences on blockchain and cryptocurrency. See Jan. 25, 2021 Emails; Mar.
26, 2021 Emails; see also Kahl, 856 F.3d at 115 (noting that “the plaintiff’s past conduct” is
probative of whether plaintiff possesses the requisite role in the public controversy (quoting
Lohrenz, 350 F.3d at 1279)). Indeed, by plaintiffs’ own admission, Dabek has been involved in
active public outreach and education efforts concerning Safex and its products through social
media, see Compl. ¶¶ 6–12, which indicates that he has “purposefully tr[ied] to influence the
outcome” of the controversy over the legitimacy of Safex’s products or “could realistically have
been expected, because of his position in the controversy, to have an impact on its resolution,”
Jankovic, 822 F.3d at 587 (quoting Waldbaum, 627 F.2d at 1297). Nor does the fact that the
public controversy at issue is not of Dabek’s own making mean that he does not possess the
requisite role in that controversy, as “[o]ccassionally, someone is caught up in the controversy
involuntarily and, against his will, assumes a prominent position in its outcome,” Waldbaum, 627
F.2d at 1298. While a person does not become a limited purpose public figure solely by
advertising his business to the public, see, e.g., id. at 1299 (“Being an executive within a
prominent and influential company does not by itself make one a public figure.”), but in light of
the nature of the controversy at issue here, namely whether Safex and its products are legitimate
and trustworthy, Dabek’s attempts to convince the public of their legitimacy by placing himself
into the public sphere and marketing those products for sale and use satisfy the second prong of
the limited-purpose public figure inquiry.
Third, defendants’ statements at issue here are germane to the identified public
controversy and Dabek’s role therein. The germaneness requirement, which “ensures that
[speakers] cannot use an individual’s promise in one area of public life to justify publishing
23
negligent falsehoods about an unrelated aspect of the plaintiff’s life,” Kahl, 856 F.3d at 115
(quoting Jankovic, 822 F.3d at 589), provides that “‘[m]isstatements wholly unrelated to the
controversy’ are not protected [by the actual malice standard], but statements, including those
highlighting a plaintiff’s ‘talents, education, experience, and motives,’ can be germane,”
Jankovic, 822 F.3d at 589 (emphasis added by Jankovic) (quoting Waldbaum, 627 F.2d at 1298).
This prong is plainly satisfied here, as defendants’ statements at issue directly contribute to, and
indeed partially comprise, the debate over the public controversy at issue, namely whether Safex
and its products are trustworthy. As such, those statements are far from “wholly unrelated,” id.(emphasis omitted) (quoting Waldbaum, 627 F.2d at 1298), to the relevant controversy, and the
third prong of the limited-purpose public figure analysis is therefore satisfied.
In sum, then, because all three prongs of the limited-purpose public figure analysis are
satisfied, the Court concludes that Dabek is a limited purpose public figure, such that, in order to
succeed on their defamation claim, plaintiffs must show that defendants acted with actual malice.
Kahl, 856 F.3d at 113; Jankovic, 822 F.3d at 589.9
b. Defendants’ Statements Regarding Plaintiffs’ Trademark
Infringement
Having established that Dabek is a limited purpose public figure and so must satisfy the
actual malice standard in order to succeed on his defamation claim, plaintiffs’ likelihood of
success on the merits as to their defamation claim based on defendants’ statements alleging that
plaintiffs are infringing their trademark is now considered.
First, plaintiffs have established that they will likely be able to show that defendants’
statements that plaintiffs are infringing defendants’ trademark were both false and defamatory.
9
Even if Dabek were not a limited-purpose public figure, such that plaintiffs needed to prove only
negligence, rather than actual malice, in order to prevail on their defamation claim, the outcome of the analysis of
plaintiffs’ likelihood of success on the merits as to that claim would be unaffected. See infra notes 11, 13.
24
A defamatory statement is one that makes the plaintiff appear “odious, infamous, or ridiculous.”
Howard Univ. v. Best, 484 A.2d 958, 989 (D.C. 1984) (quoting Johnson v. Johnson Publ’g Co.,
271 A.2d 696, 697 (D.C. 1970)). Defamation per se, which plaintiffs allege here, occurs when a
defendant makes a statement “so likely to cause degrading injury to the subject’s reputation that
proof of . . . harm is not required to recover compensation.” Franklin v. Pepco Holdings, Inc.,
875 F. Supp. 2d 66, 75 (D.D.C. 2012) (citing Carey v. Piphus, 435 U.S. 247, 262 (1978)); see
also, e.g., Carey, 435 U.S. at 262 n.18 (“The essence of [defamation] per se is the publication . . .
of false statements imputing to a person a criminal offense; a loathsome disease; matter affecting
adversely a person’s fitness for trade, business, or profession; or serious sexual misconduct.”).
Defendants’ statements that plaintiffs are infringing defendants’ trademark are likely
defamatory per se, as those statements impute wrongdoing to plaintiffs and suggest that they are
untrustworthy for their business, causing significant direct and indirect reputational effects on
plaintiffs. See, e.g., Moldea v. N.Y. Times Co. (“Moldea I”), 15 F.3d 1137, 1142 (D.C. Cir.
1994), modified, Moldea v. N.Y. Times Co. (“Moldea II”), 22 F.3d 310 (D.C. Cir. 1994) (“Under
District of Columbia law, a statement is defamatory ‘if it tends to injure plaintiff in his trade,
profession or community standing, or lower him in the estimation of the community.’” (quoting
Afro–American Publ’g Co. v. Jaffe, 366 F.2d 649, 654 (D.C. Cir. 1966) (en banc))); see also id.
at 1145 (“[I]t is defamatory publicly to disparage a person’s competence in his chosen field.”).
As explained, see supra Part III.A.2; see also infra Part III.B.2.a, such reputational effects have a
special capacity for injury here, given that plaintiffs are attempting to develop a largely unknown
product in a dynamic, tumultuous market with heightened sensitivity to products’ and producers’
reputations. Defendants’ false statements not only cast doubt on the legitimacy of Safex and its
products, by stating that the company has violated trademark law, but has in fact had significant
25
negative consequences on plaintiffs’ business efforts, given that, as explained, defendants were
delisted from important cryptocurrency platforms as well as social media as a consequences of
defendants’ claims of trademark infringement. See also infra Part III.B.2.a.
Plaintiffs will also likely be able to prove the falsity of these statements, which turns on
the outcome of plaintiffs’ trademark claim. In other words, if plaintiffs are correct that they own
the Safex trademark and that defendants are infringing that trademark, then defendants’ claims to
the contrary are false. As explained, see supra Part III.A, plaintiffs have demonstrated a
likelihood of success as to their trademark claim. Therefore, they have also demonstrated a
sufficient likelihood that defendants’ statements that their Safeth trademark is being infringed by
plaintiffs are false.
Second, statements in this category also meet the publication requirement. This prong
requires defendants to “have published or knowingly participated in publishing the defamation.”
Tavoulareas v. Piro, 759 F.2d 90, 136 (D.C. Cir. 1985) (emphasis omitted), vacated in part on
other grounds on reh’g, 763 F.2d 1472 (D.C. Cir. 1985), and on reh’g en banc, 817 F.2d 762(D.C. Cir. 1987) (en banc); see also, e.g., LaRue v. Johnson, Civil Action No. 16-00504
(EGS/RMM), 2018 WL 1967128, at *4 (D.D.C. Feb. 22, 2018) (“Publication, for purposes of the
second element, requires that the defamatory statement be communicated to one or more
individuals ‘other than the person defamed.’” (quoting Zimmerman v. Al Jazeera Am., LLC, 246
F. Supp. 3d 257, 273 (D.D.C. 2017))). Given that defendants publicly posted these statements on
social media, in addition to directly contacting social media websites, cryptocurrency listing
websites, and cryptocurrency exchanges in order to make these statements, this prong will likely
be satisfied.
26
Third, plaintiffs have demonstrated that they will likely be able to prove that defendants
acted with actual malice in publicly stating that plaintiffs were infringing their trademark. The
actual malice standard, a “daunting one,” Jankovic, 822 F.3d at 590 (quoting McFarlane v.
Sheridan Square Press, Inc., 91 F.3d 1501, 1509, 1515 (D.C. Cir. 1996)), that is a key bulwark
in preserving the First Amendment’s “most important role” of “protection of robust and
uninhibited debate on important political and social issues,” Nat’l Rev., Inc. v. Mann, 140 S. Ct.
344, 346 (2019) (Alito, J., dissenting from denial of petition for a writ of certiorari) (citing
Snyder v. Phelps, 562 U.S. 443, 451–52 (2011); N.Y. Times Co. v. Sullivan, 376 U.S. 254, 270
(1964)); see also id. at 348 (“The core purpose of the constitutional protection of freedom of
expression is to ensure that all opinions on” “important and controversial issue[s]” “have a
chance to be heard and considered.”), requires a plaintiff to prove that the statement was made
“with knowledge that it was false or with reckless disregard of whether it was false or not.” N.Y.
Times Co., 376 U.S. at 280; see also Jankovic, 822 F.3d at 589 (citing N.Y. Times Co., 376 U.S.
at 279–80). “Actual malice may be inferred through circumstantial evidence, including ‘the
defendant’s own actions or statements, . . . [or] the inherent improbability of the story.’” Kahl,
856 F.3d at 116 (alteration in original) (quoting Liberty Lobby, Inc. v. Dow Jones & Co., Inc.,
838 F.2d 1287, 1293 (D.C. Cir. 1988)). “Whatever proof is offered, that proof must show that
‘the defendant in fact entertained serious doubts as to the truth of his publication.’” Id.(emphasis added by Kahl) (quoting St. Amant v. Thompson, 390 U.S. 727, 731 (1968)). A
plaintiff must prove actual malice by clear and convincing evidence, rather than the less
demanding preponderance of the evidence standard. Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 256 (1986).
27
The actual malice standard is satisfied as to this category of statements. Given defendant
Joey Lathus’s prior involvement with and marketing of Safex and his resultant knowledge of
Safex’s use of its trademark to advertise and sell cryptocurrencies, defendants’ statements to
CoinGecko, Livecoin, and Twitter, as well as to the general public, that plaintiffs were infringing
defendants’ trademark appear to have been knowingly false. In particular, defendants’
misrepresentation in their USPTO application that the trademark had not been used in commerce
prior to December 2019 was not inadvertent and was plainly false, given the applied-for
trademark’s obvious resemblance to, and indeed the logo’s near duplication of, plaintiffs’ Safex
trademark.10 Finally, defendants’ various social media posts indicating that they were aware of
and in fact celebrated the harm that they were causing to plaintiffs by deplatforming them
through allegations of trademark infringement, see supra Part III.A.2., further bolsters the
conclusion that those statements were made with actual knowledge of falsity and therefore with
actual malice.11
Fourth, these statements also satisfy the final defamation prong, that is, they are
“actionable as a matter of law irrespective of special harm,” Oparaugo, 884 A.2d at 76 (quoting
Crowley, 691 A.2d at 1173 n.2). “Actionable as a matter of law” “denote[s] the fact that the
publication is of such a character as to make the publisher liable for defamation although no
10
To be sure, plaintiffs had not registered their trademark with USPTO. Cf. Sealed Document at 10, ECF No.
15 (defendants suggesting that they had “every right” to use the Safex trademark because it was unregistered). Even
cursory research, however, would have revealed to defendants that Safex need not have registered its trademark with
the USPTO in order to own that trademark, information any reasonable person would have obtained before publicly
lobbing the weighty accusation of trademark infringement, and defendants’ failure to do so, in light of other
evidence indicating that this category of statements was knowingly false, constitutes reckless disregard of the truth.
11
As noted, even if the negligence standard, rather than the actual malice standard, applied to plaintiffs’
defamation claim, the outcome of this analysis would not differ. See supra note 9. Since actual malice is a more
demanding culpability standard than negligence, see, e.g., St. Amant, 390 U.S. at 731; McFarlane, 91 F.3d at 1509,
1515, the fact that plaintiffs have demonstrated that defendants acted with actual malice necessarily implies that they
have also shown that plaintiffs have acted with “at least negligence,” Oparaugo, 884 A.2d at 76 (quoting Crowley,
691 A.2d at 1173 n.2). In other words, evidence suggesting that defendants made these statements knowing that
they were false, and with the intention of harming plaintiffs, suffices to establish that defendants were at least
negligent in making such statements.
28
special harm results from it.” RESTATEMENT (SECOND) OF TORTS § 569, cmt. b (1977) (cited in
Oparaugo, 884 A.2d at 79). Statements, like these, that affect plaintiffs “business, trade, [or]
profession” are actionable as a matter of law irrespective of special harm. Id. § 569, cmt. e; see
also id. (noting that statements “that attribute to the [plaintiff] conduct or characteristics
incompatible with the proper conduct of his lawful trade or profession” are actionable as
defamation without need to show special harm).
Accordingly, plaintiffs have demonstrated that they will likely be able to prove all four
prongs of the defamation analysis, and have therefore shown that they will likely succeed on the
merits of their defamation claim as to this category of statement by defendants.
c. Defendants’ Statements Regarding Plaintiffs’ Criminality
Plaintiffs’ likelihood of success as to their defamation claim based on defendants’
statements to the effect that plaintiffs are operating a scam or facilitating criminal activity is
another matter, however. The statements in this category that plaintiffs seek to enjoin include
that (1) Dabek worked in Serbia developing a cryptocurrency called Dascoin, (2) Dascoin was an
exit scam or Ponzi scheme, and (3) Dascoin was subject to a cease and desist order from the
British Columbia Securities Commission, as well as enforcement action, including an $11
million seizure, in Poland. This category of statements also includes defendants’ conclusions, on
the basis of the preceding factual claims, (4) that Safex also is, or may be, an exit scam, (5)
comparing Safex to Silk Road and Alphabay, and, (6) more specifically, that Safex may be used
to facilitate illegal transactions, thereby “ignor[ing] and undermin[ing] the [U.S.] judicial
system.” Compl. ¶ 113.12 Plaintiffs face a daunting challenge in succeeding on this claim, as
12
Specifically, the online statements that Safex is a scam, which plaintiffs argue are actionable defamation,
are (1) “Safex dabek took down livecoin to get the fuck out now wgen [sic] it goes back up it will be worse and you
won’t get funds out do not deposit at livecoin @livecoin_net Safex has hijacked xcalibra is going too!!!!,” Dabek
Decl. ¶ 110, and (2) “#safexexecitscam jump shippppppp the boat is sinking!!!!!!!,” id. ¶ 110, and (3) “Warning
29
they would need to prove both that these statements are false and that defendants published these
statements with actual malice, see supra Part III.B.1.a.
To succeed on their defamation claim, plaintiffs would need to prove that these
statements are false. The difficulty of proving any negative is obvious, and such a challenge
applies equally here to prove that Safex is not an exit scam and is not or will not become a hub
for illegal commerce. Nonetheless, plaintiffs have made only the barest attempt to demonstrate
the falsity of such claims. As noted during the January 26, 2021 hearing, plaintiffs’ original
submissions in support of their Motion for a Temporary Restraining Order and Motion for a
Preliminary Injunction “ma[de] no attempt to show that these statements, allegedly by
defendants, are false, other than to say they are false.” Hr’g Tr. at 65:18–22. For instance, in his
original declaration, plaintiff Dabek did not deny that he worked in Serbia, that he was a
developer for Dascoin, or that Dascoin was subject to enforcement actions in Canada and Poland.
See generally Dabek Decl. Nor did Dabek elaborate on his connection with Dascoin and its
founders, or otherwise attempt to rebut the allegation that Dascoin was a scam. See generally id.
To the contrary, at the January 26, 2021 hearing, plaintiffs “conceded [as] true,” Hr’g Tr. at 66:3,
the first three statements in the second category enumerated above, namely that that Dabek was
involved in the development of Dascoin in 2017 and that “there was an investigation into
DasCoin by certain authorities overseas,” id. at 21:13–21, although they denied that Dabek
engaged in any wrongdoing or criminality, noting, for instance, that he “was never contacted by
warning to all @livecoin_net and @safex users this is an exit happening right now DO NOT DEPOSIT WHEN IT
GOES BACK UP DO NOT USE XCALIBRA @xcalibrasupport.” Id. ¶ 111. The statement comparing Safex to
Silk Road and Alphabay that plaintiffs identify as defamation is, “Can you imagine how incredibly stupid it would
have been for alphabay or silk road founders to have used Twitter o[r] [Facebook] to advertise their market. Only
safex thinks it can make software that ignores and undermines the us judicial system and then expect its
protections.” Compl. ¶ 139; Dabek Decl. ¶ 113.
30
anyone in law enforcement, was never investigated by anyone in law enforcement, [and] nobody
in law enforcement ever accused him of doing anything wrong,” id. at 21:21–24.
Seizing on the Court’s observation that plaintiffs had not adequately addressed the truth
or falsity of defendants’ statements, plaintiff Dabek has since submitted a supplemental
declaration. See Dabek Suppl. Decl. In his supplemental declaration, Dabek explains that during
significant portions of 2017, after he “was contacted by a Dascoin executive who provided [him]
with a comprehensive business plan,” he “was an independent consultant for . . . Dascoin,” in
which role he was “tasked with helping to implement Dascoin’s payment and lending platforms”
and “helped Dascoin identify and hire technical talent[,] including programmers, cryptographers,
and other technical blockchain professionals.” Id. ¶¶ 9–11. He denies that he was “aware of any
government investigations into Dascoin while [he] was an independent consultant,” id. ¶ 13, or
that he was personally “engaged in any Ponzi scheme, ‘exit scam,’ or ‘pump and dump’ scheme”
while working for Dascoin, id. ¶ 18. In short, he states that defendants’ accusations that he
played a role in the Dascoin “Ponzi scheme and other scams supposedly perpetuated by insiders
at Dascoin” are false. Id. ¶ 17. Regarding Safex, he states that defendants’ claim that it is an exit
scam is false, that he has “devoted countless hours to developing” Safex’s products and has “no
plans to abandon Safex and [is] committed to developing the platform to its fullest potential,” id.
¶ 19, and that, unlike on Silk Road and Alphabay, “[t]hird party merchants that are caught
attempting to sell illicit goods and services on [Safex Marketplace] will be delisted from the
platform,” id. ¶ 21, such that defendants’ comparisons of Safex Marketplace to Silk Road and
Alphabay are also false, see id. ¶ 20.
For two independent reasons, however, both of which suffice to establish that plaintiffs
will not succeed on the merits of their defamation claim as to this category of statements,
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Dabek’s supplemental declaration does little to help plaintiffs. First, as a limited-purpose public
figure, Dabek must demonstrate that defendants made these statements with actual malice, which
plaintiffs have failed, and will be unable, to do. Second, for purposes of the legal issue before
the Court, defendants’ statements cannot, consistent with the First Amendment, qualify as
actionable defamation. These two defects are discussed in turn.
i. Plaintiffs Have Not Demonstrated that Defendants Acted with
Actual Malice
As explained above, see supra Part III.B.1.b, the “daunting” actual malice standard,
Jankovic, 822 F.3d at 590 (quoting McFarlane, 91 F.3d at 1515), requires plaintiffs to prove that
these statements were made “with knowledge that [they were] false or with reckless disregard of
whether [they were] false or not,” N.Y. Times Co., 376 U.S. at 280. Crucially, plaintiffs have
made no attempt to show any culpability—not even the much less demanding standard of
negligence that ordinarily applies to a defamation action—on the part of defendants. See
generally Pls.’ Mem. at 19–26. As such, they have provided the Court no basis on which to
determine that they will likely succeed in proving actual malice and thus succeed on their
defamation claim based on this category of statements.
Nor could they. In light of the suggestive information connecting Dabek with Dascoin,
publicly available on the internet, and the self-evident similarities between Safex’s products and
Silk Road and Alphabay, plaintiffs will be unable, as a matter of law, to demonstrate that
defendants acted with actual malice. In other words, given the information online connecting
Dabek with Dascoin, and the anonymity of Safex’s cryptocurrencies and the Safex Marketplace,
plaintiffs cannot prove that defendants acted with actual malice in warning that Safex is also a
scam and that Safex Marketplace will be used for illegal purposes, even if those propositions
ultimately turn out not to be true. That statements in this category may eventually be determined
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to be false does not change this analysis, as the Supreme Court “has been careful to instruct that
falsity alone may not suffice to bring . . . speech outside the First Amendment,” United States v.
Alvarez, 567 U.S. 709, 719 (2012), and indeed the very purpose of the actual malice standard is
to provide speakers with “breathing space,” N.Y. Times Co., 376 U.S. at 272 (quoting NAACP v.
Button, 371 U.S. 415, 433 (1963), to state occasional inadvertent falsehoods, given “[t]hat
erroneous statement is inevitable in free debate, and . . . must be protected” if freedom of
expression is to survive, id. at 271. Regardless, as explained in greater detail below, see infra
Part III.B.1.c.ii, defendants’ public statements that Safex is a scam and that Safex Marketplace
might be used to facilitate illegal commerce are predicated on facts that plaintiffs have conceded
as true, revolving around Dabek’s past involvement with Dascoin. Given that defendants’
interpretation of these facts is not utterly without foundation, it surely cannot be said that in
publicizing them, defendants have acted with reckless disregard of the truth, much less with
knowledge that those statements are false, see N.Y. Times Co., 376 U.S. at 279–80. Accordingly,
plaintiffs cannot show that defendants made this category of statements with actual malice, and
therefore have failed to demonstrate that they will likely succeed on the merits of their
defamation claim with respect to this category of statements.13
13
As noted, application of the negligence standard, rather than the actual malice standard, would not change
the outcome of this analysis. See supra note 9. With respect to this category of statements, even if the actual malice
standard did not apply, plaintiffs would be unable to prove that these statements were made even with mere
negligence. Negligence in this context is “‘a failure to observe an ordinary degree of care in ascertaining the truth of
an assertion before publishing it to others,’ . . . i.e., ‘a failure to make a reasonable investigation as to the truth.’”
Kendrick v. Fox Television, 659 A.2d 814, 822 (D.C. 1995) (citation omitted) (quoting Moss v. Stockard, 580 A2d.
1011, 1025–26 (D.C. 1990)). As just explained, plaintiffs have made no attempt to show that defendants made these
statements with any level of culpability—not even negligence—and, furthermore, plaintiffs’ failure to demonstrate
defendants’ actual malice rests on a determination that this category of statements is not wholly without factual
foundation. Given the Court’s conclusion that, as a matter of law, defendants’ statements claiming plaintiffs’
wrongdoing had some possible basis, plaintiffs cannot show that defendants failed “to observe an ordinary degree of
care in ascertaining the truth” of these claims before stating them publicly, Kendrick, 659 A.2d at 822. Accordingly,
plaintiffs have not shown that defendants were even negligent in making this category of statements, and so they are
unlikely to succeed on the merits of their defamation claim with respect to this category of statements regardless of
whether the actual malice or negligence standard is applied.
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ii. These Statements Are Not Actionable Defamation Because
They Do Not Present a Verifiable Issue of Fact
Plaintiffs’ inability to prove, and failure to even argue, actual malice is dispositive of
their likelihood of success on the merits as to their defamation claim based on this category of
statements, and thereby precludes injunctive relief as to those statements. Plaintiffs will not
succeed on the merits for a second independent reason, however, namely that this category of
statements does not present a verifiable issue of fact and therefore is not actionable under
defamation law. As noted, plaintiffs have acknowledged that some of defendants’ factual claims
about Dabek’s involvement with Dascoin are in fact true, whereas the ultimate conclusions that
defendants have drawn from this body of facts, namely that Safex, like Dascoin, is a scam and,
like Silk Road and Alphabay, will be used to facilitate illegal transactions, are disputed. In these
circumstances, defendants’ statements of their opinion about the conduct of Safex’s founder and
the likely trajectory of the company and its products, based as they are on concededly true facts,
cannot be the basis for defamation liability.
The First Amendment does not “create a wholesale defamation exemption for anything
that might be labeled ‘opinion,’” Milkovich v. Lorain Journal Co., 497 U.S. 1, 18 (1990); see
also id. at 21 (rejecting the argument that “an additional separate constitutional privilege for
‘opinion’ is required to ensure the freedom of expression guaranteed by the First Amendment”),
in large part because “expressions of ‘opinion’ may often imply an assertion of objective fact,”
id. at 18. Indeed, when a statement of opinion can “‘reasonably [be] interpreted as stating actual
facts’ about an individual,” id. at 20 (alteration in original) (quoting Hustler Magazine, Inc. v.
Falwell, 485 U.S. 46, 50 (1988)), and “contain[s] a provably false factual connotation,” id., it
may be actionable defamation, so long as the other requirements of defamation and First
Amendment law are satisfied. See, e.g., Moldea I, 15 F.3d at 1142. Whether a statement is
34
actionable because it contains a provably false statement of fact is a question of law for the court
to decide. See id. But see Mann, 140 S. Ct. at 345–46 (Alito, J., dissenting from denial of
petition for a writ of certiorari) (noting circuit split on whether this is legal question for court to
decide or factual question for jury to decide).
The First Amendment is thus not a blank check to make defamatory statements under the
guise of stating an opinion. At the same time, however, defendants’ statements at issue here are
nonetheless entitled to significant First Amendment protection. Speakers “must be given some
leeway to offer ‘rational interpretation’ of ambiguous sources,” Moldea II, 22 F.3d at 313(quoting Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 519 (1991)); see also, e.g.,
Montgomery v. Risen, 875 F.3d 709, 713 (D.C. Cir. 2017) (“[W]here a person claims to have
been defamed by statements about matters of public concern, the First Amendment protects
robust debate by preventing either ‘pure opinion[s]’ or truthful statements from serving as
grounds for liability.” (second alteration in original) (quoting Milkovich, 497 U.S. at 20)); cf.
Moldea II, 22 F.3d at 313, 315 (holding that critical book review “is ‘actionable only when the
interpretation[] [is] unsupportable by reference to the written work,’” and that “[t]his
‘supportable interpretation’ standard provides that a critic’s interpretation must be rationally
supportable by reference to the actual text he or she is evaluating” (emphasis added by Moldea
II) (quoting Pet. for Reh’g at 8)). As such, “when a writer is evaluating or giving an account of
inherently ambiguous materials or subject matter, the First Amendment requires that the courts
allow latitude for interpretation,” id. at 315, and when he or she “offers commentary that is tied
to the work being [critiqued], and that is a supportable interpretation of the . . . work, that
interpretation does not present a verifiable issue of fact that can be actionable in defamation.” id.
at 313.
35
The statements at issue here, see supra note 12, although arguably framed as speculation
about the possibility that Safex may be a scam rather than an outright statement that it is a scam,
have a clear factual connotation, see Milkovich, 497 U.S. at 20; see also, e.g., Weyrich v. New
Republic, Inc., 235 F.3d 617, 624 (D.C. Cir. 2001) (“[S]tatements of opinion can be actionable if
they imply a provably false fact . . . .” (alteration in original) (quoting Moldea II, 22 F.3d at
313)), namely that Safex is an exit scam. Nonetheless, defendants’ warnings that Safex, like
Dascoin, are a scam are the kind of “interpretation” of “ambiguous materials” for which the First
Amendment dictates “latitude.” Moldea II, 22 F.3d at 315. In light of publicly available
information, provided to the Court by defendants, see Jan. 25, 2021 Emails; Mar. 26, 2021
Emails, concerning Dabek’s past association and involvement with Dascoin and the multiple
enforcement actions to which Dascoin was subject on the grounds that it was a scam, and given
Dabek’s own acknowledgement of his past involvement, as a key developer, with a
cryptocurrency subsequently revealed to be a scam, defendants’ conclusion that Safex, like
Dascoin, is a scam is “rationally support[ed] by reference to” those underlying facts, Moldea II,
22 F.3d at 313. Indeed, when a project with which a person is intimately involved turns out to be
fraudulent, concern that a future similar project by the same person may also be fraudulent is not
unreasonable. As such, these statements do “not present a verifiable issue of fact that can be
actionable in defamation.” Id. at 315. Accordingly, plaintiffs have not met their burden to show
that they are likely to prove that these statements by defendants that Safex is an exit scam are
false, and in fact, as a matter of law, will be unable to do so.
Defendants’ comparison of Safex Marketplace to Silk Road or Alphabay are likewise not
actionable defamation, albeit for a slightly different reason: these statements cannot “reasonably
[be] interpreted as stating actual facts” about plaintiffs, Milkovich, 497 U.S. at 20 (alteration in
36
original) (quoting Falwell, 485 U.S. at 50), or at least do not connote the factual statements that
plaintiffs claim. Contrary to plaintiffs’ characterization, this category of statements, see supra
note 12, does not state “in no uncertain terms[] that Safex and Mr. Dabek are running a criminal
enterprise engaged in activities like child pornography, selling firearms, and illicit drugs.” Pls.’
Mem. at 24 (emphasis added). Rather, it amounts to an observation that Safex Marketplace
might be attractive to users because of its similarity to Silk Road and Alphabay, namely its
ability to facilitate illegal commerce. That observation does not appear to be false, given that the
anonymity of the Safex Marketplace and Safex Cash, which are integral features of those
products, might encourage some users to buy and sell illegal products and services on the Safex
Marketplace platform, confident that any illegal activity would not be traceable to them.
At most, then, defendants’ statements can reasonably be interpreted as observing, or
restating, indisputable facts about the anonymity of Safex’s products or, alternatively, about the
fact that other anonymous social media users have observed those same similarities between
Safex Marketplace on the one hand and Silk Road and Alphabay on the other. As explained, see
supra Part III.B.1.a, defendants are not the only individuals to observe this similarity and, in fact,
in the very Twitter post that plaintiffs object to, see Def.’s Mem. at 10; see also Dabek Decl., Ex.
DD, Jan. 7, 2021 Twitter Post, ECF No. 4-31, the poster, allegedly Joey Lathus, included four
attached images of other Twitter users likening Safex Marketplace to Silk Road.14 Nor are those
four the only online users, other than defendants, to note Safex Marketplace’s potential to
become a marketplace for illicit goods and services, facilitated by the anonymity of Safex’s
cryptocurrencies. See Jan. 25, 2021 Emails; Mar. 26, 2021 Emails; see also supra Part III.B.1.a
14
For instance, in this Twitter post, Lathus cites another anonymous user posting “$SAFEX is silk road v.
2.0… Going to be big…” and another who writes, “Privacy coin $safex about to launch #MainNet in couple of
days” and notes that “[i]ts e-commerce platform will be . . . decentralized & anonymous.” Jan. 7, 2021 Twitter Post.
37
(summarizing and sampling some of these third-party statements). Of course, the speculation of
anonymous people on the internet does not mean that Safex Marketplace in fact is being used, or
will be used, for such illicit activities. Yet this category of statements for which plaintiffs seek to
impose defamation liability on defendants consists largely of nothing more than observations that
other online users believe that Safex resembles Silk Road and Alphabay.
In sum, then, plaintiffs have met their burden of showing that they will likely prevail on
their defamation claim to the extent the basis is the category of defendants’ statements that
plaintiffs are infringing defendants’ trademark. Accordingly, analysis of the remaining
preliminary injunction factors as to this category of statements continues below. By contrast,
plaintiffs have failed to show that they will likely prevail on the part of their defamation claim
concerning the category of defendants’ statements warning about the criminality of Safex’s
products. Failure to demonstrate likelihood of success on the merits forecloses the possibility of
a preliminary injunction, see Ark. Dairy Co-op Ass’n, Inc., 573 F.3d at 832, and, consequently,
plaintiffs’ request for a preliminary injunction enjoining defendants from continuing to make
such statements is denied.
2. Remaining Preliminary Injunction Factors as to Defendants’
Statements Regarding Plaintiffs’ Trademark Infringement
As explained, see supra Part III.B.1, plaintiffs have demonstrated likelihood of success
on their defamation claim with respect to defendants’ statements that plaintiffs are infringing
defendants’ trademark, but not with respect to defendants’ statements that plaintiffs are operating
an exit scam and likening Safex Marketplace to Silk Road or Alphabay. Accordingly, the
remainder of the preliminary injunction analysis proceeds with respect to the former category of
statements, but not the latter. Plaintiffs have demonstrated that, as to defendants’ statements that
38
plaintiffs are infringing defendants’ trademark, the remaining three factors favor injunctive
relief.
a. Irreparable Harm
As explained, see supra Part III.A.2, defendants’ alleged infringement of the Safex
trademark will likely cause plaintiffs irreparable injury if not enjoined. Defendants’ public
statements that plaintiffs are in fact infringing their trademark exacerbates that irreparable injury,
and plaintiffs point to several specific harms that they are currently suffering and will continue to
suffer as a result of these statements. The suspension of plaintiffs’ social media accounts,
prompted by defendants’ claims of trademark infringement, has inhibited plaintiffs’ ability to
market the launch of Safex Marketplace. Dabek Decl. ¶¶ 127, 129–31. Additionally, there is
currently a unique “boom” in cryptocurrencies, particularly since December 2020, with the value
of many cryptocurrencies increasing dramatically, id. ¶ 132, and according to plaintiffs, “there
has never been a time period in which more investments have poured into cryptocurrency and
more buyers are in the market,” id. ¶ 134. Plaintiffs’ delisting from some listing websites and
cryptocurrency exchanges and removal from social media websites means that Safex’s
currencies have been “hamstrung,” id. ¶132, however, missing out “from gaining market share
during this historic influx of capital into the cryptocurrency market,” Pl.’s Mem. at 11.
Defendants’ prior attempts to have plaintiffs terminated or delisted from social media,
cryptocurrency exchanges, and cryptocurrency listing websites have caused reputational harm,
by suggesting that Safex and its products are illegitimate or illegal. See Dabek Decl. ¶ 139
(noting that potential cryptocurrency customers rely on listing websites to determine whether a
given currency is legitimate). There is more such harm to which plaintiffs would likely be
subject absent a preliminary injunction. More deplatforming from social media, or delisting
39
from listing website or currency exchanges, on the basis of defendants’ allegations of trademark
infringement, would further degrade plaintiffs’ reputations and inhibit their attempts to make
Safex’s cryptocurrencies and the Safex Marketplace a success. Furthermore, as explained, see
supra Part III.A.2, the evidence suggests that defendants will continue to wage their public
relations campaign against plaintiffs and their products, including by continuing to assert to other
platforms, including social media platforms, other currency exchanges, and other listing
websites, that plaintiffs are infringing defendants’ trademark. Accordingly, plaintiffs have
shown that defendants’ alleged trademark-infringement-based defamation will cause them
irreparable injury absent an injunction.
b. The Balance of Equities and the Public Interest
As explained, the balance of equities and the public interest both favor preliminary
injunctive relief as to defendants’ alleged trademark infringement, see supra Part III.A.3, and
defendants’ likely defamatory statements that plaintiffs are infringing defendants’ trademark are
closely related to, and exacerbate, the harm caused by their trademark infringement, see supra
Part III.B.2.a. In particular, defendants’ likely false statements that plaintiffs have infringed
defendants’ trademark will reasonably cause confusion and has in fact caused at least one variety
of such confusion, leading social media platforms, cryptocurrency listing websites, and
cryptocurrency exchanges to remove from their platforms plaintiffs and their products.
Preventing such confusion is in the public interest, see Delta Sigma Theta, 215 F. Supp. 3d at 21;
Crime Control, Inc., 624 F. Supp. at 582, and accordingly, the balance of equities and the public
interest both favor an injunction as to this category of defendants’ allegedly defamatory
statements.
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IV. CONCLUSION
For the foregoing reasons, plaintiffs have shown that they will likely succeed on the
merits of their trademark infringement claim against defendants, that they will suffer irreparable
harm from that infringement absent a preliminary injunction, and that the balance of equities and
the public interest both favor injunctive relief as to defendants’ alleged infringement. Plaintiffs
have also shown that they will likely succeed on their defamation claim as to defendants’
statements that plaintiffs are infringing defendants’ trademark, and the remaining three
preliminary injunction factors are satisfied as to those statements, for the same reasons they are
satisfied with respect to plaintiffs’ trademark infringement claim. Defendants will therefore be
preliminarily enjoined from both infringing plaintiffs’ trademark and publicly stating that
plaintiffs are infringing defendants’ trademark. On the other hand, plaintiffs have failed to show
that they will likely prevail on their defamation claim based on defendants’ statements that
plaintiffs are or may be engaged in an exit scam and likening Safex Marketplace to Silk Road
and Alphabay, and so plaintiffs’ motion for a preliminary injunction as to those statements is
denied.
An Order consistent with this Memorandum Opinion will be entered contemporaneously.
Date: March 26, 2021
__________________________
BERYL A. HOWELL
Chief Judge
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