A lawsuit was filed against cannabis cryptocurrency brand Paragon Coin and its owners Jessica VerSteeg and her husband Egor Lavrov for allegedly violating Securities law with regards to the Paragon Initial Coin Offering (ICO).
The lawsuit states that approximately between August 15, 2017, through October 16, 2017, the defendants raised at least $70 million in digital cryptocurrencies by offering and selling unregistered securities in direct violation of the Securities Act. It also stated that on November 2, 2017, Paragon ICO investors received an email updating them that during the Paragon ICO “crowd sale” they had collected 533 BTC and 8,092 ETH— worth approximately $7.3 million and $10.2 million, respectively, as of January 12, 2018. Unfortunately, these amounts did not include any of the cryptocurrencies they collected during the Paragon ICO “presale.”
The plaintiff Astley Davy states that the offer of the ICO was an unregistered security and cites the use of words like investors and assets as evidence that the ICO was being portrayed as a securities product.
Jessica VerSteeg, CEO of Paragon said, “Paragon is dedicated to staying compliant with all applicable laws, and endeavored to do so throughout the entire ICO process. As U.S. Securities and Exchange Commission Chairman Jay Clayton recently stated, “there are cryptocurrencies that do not appear to be securities,” and whether an initial coin offering implicates the securities laws “depends on the facts.” We are confident that the ParagonCoin token is not a security and can prove so in a court of law. Paragon holds itself to a high standard of compliance with our token holders and will continue to do so as it moves forward.”
Securities And Exchange Commission
The lawsuit states “The SEC advised those using “distributed ledger or blockchain-enabled means for capital raising, to take appropriate steps to ensure compliance” with the federal securities laws, and stated that “[a]ll securities offered and sold in the United States must be registered with the Commission . . .” or qualify for an exemption from registration. On the same day, the SEC issued an investor bulletin urging caution when investing in ICOs and to be mindful that promoters and initial sellers that lead buyers of tokens to expect a return on their investment or participate in shared returns provided by the project may be offering a security for sale.”
Yet, on December 11, 2017, the SEC warned that “investors should understand that to date no initial coin offerings have been registered with the SEC. The SEC also has not to date approved for listing and trading any exchange-traded products (such as ETFs) holding cryptocurrencies or other assets related to cryptocurrencies. If any person today tells you otherwise, be especially wary. ” This is the SEC’s bold-faced type.
Capital For Real Estate
The plaintiff was also upset that some of the money raised was being used to acquire real estate even though it was stated that would be a goal. Yet, in Paragon’s white paper it said, “[t]he lion’s share of the token crowdsale [sic] proceeds will be spent on real-estate acquisition.”
The plaintiff expected that its investment would increase in value and now wants to be repaid what was invested. So, how much did Davy invest?
Plaintiff invested in the Paragon ICO on September 21, 2017, September 23, 2017,
September 28, 2017, September 30, 2017, October 3, 2017, and October 15, 2017, by transmitting
0.04095 BTC, 0.03975 BTC, 0.57855 ETH, 0.0231 BTC, 0.03495 BTC, and 0.04579484 BTC,
respectively, to Defendants.
It remains to be seen how much sympathy the judge will feel for the plaintiff losing their bitcoins in a case against fraudulent bitcoin. Check out Bitcoin Era review for additional bitcoin information.