Two subsidiaries of digital asset market maker DWF Labs have sued cryptocurrency custodian BitGo (BTGO) in London, alleging the company breached token sale lock-up terms by selling discounted tokens before agreed lock-up periods expired, the Financial Times reported on Friday.

DWF Maas, which is incorporated in the British Virgin Islands, and Panama-based Falcon Digital filed the lawsuit in London's High Court. The two investment subsidiaries of DWF Labs allege they agreed to sell Falcon Finance (FF) tokens and ESPORTS tokens to BitGo at a discount, subject to a three-month lock-up period.

Private token sales are a common fundraising mechanism in the digital asset industry, allowing issuers to raise capital for projects without concern that buyers will immediately sell their allocations for a quick profit. Notably, the alleged breach here is by the buyer of the discounted allocation, not the seller — and that buyer is a custodian, a category of firm whose core role is safeguarding digital assets.

According to the claim, BitGo breached its contracts by selling the digital tokens before the agreed lock-up periods had expired, causing their prices to fall. FF declined from 8 cents at the start of its lock-up in early March to around 7 cents by late April, while ESPORTS fell from about 28 cents in mid-March to 7 cents in early June.

The subsidiaries are seeking $114 million in damages on the basis that BitGo's token sales resulted in direct losses through the fall in both tokens' prices.

"The discount BitGo received was conditional on the tokens remaining locked, and they were moved to exchanges roughly two months before the first unlock," DWF said, according to the FT's report. "We raised this with BitGo in April and May, and with no undertaking forthcoming, court action became necessary."

DWF said it raised the issue with BitGo in April and May, but moved ahead with legal action after the company did not provide an undertaking.

The dispute comes after DWF Labs drew attention for its ties to a Trump-linked crypto venture. Last year, DWF bought $25 million of WLFI tokens, the native asset of World Liberty Financial, the cryptocurrency project backed by President Donald Trump and his family. The investment drew concern from some lawmakers in Washington, D.C. over DWF founder Andrei Grachev's alleged links to Russia. Grachev served as CEO of crypto exchange Huobi's Russian arm between 2018 and 2019, and Huobi has been sanctioned in various jurisdictions for helping Russia evade Western sanctions.

Neither DWF nor BitGo immediately responded to CoinDesk's request for comment. As the case proceeds at London's High Court, BitGo's formal response to the allegations will be the next development to watch.

This article was first published by CoinDesk.