Stay up-to-date with the latest developments in securities law through access to both news and all statutes and regulations. Find relevant corporate filings through a searchable EDGAR database. And...
A marijuana startup hoping to use blockchain technology for cannabis industry infrastructure is under fire from investors who allege its $70 million ICO was an unregistered sale of securities.
Paragon Coin Inc., whose founders include Jessica VerSteeg, a former model, Miss Iowa, and an Amazing Race contestant, failed to register its initial coin offering as a securities offering, according to a Jan. 30 class action complaint filed in the U.S. District Court for the Northern District of California. This suit is one of several brought by unhappy investors against ICOs in the last few months, although no federal court has yet held that ICOs are subject to securities laws.
Paragon’s ICO brought in cryptocurrencies worth $70 million, which investors now want back, according to the complaint. Paragon allegedly promoted its ICO to investors as a way to support additional legalization of the cannabis industry, which currently lacks access to traditional financial systems because of federal prohibition.
Paragon previously made waves after recruiting rapper The Game to promote its ICO, although he isn’t named in the complaint and hasn’t been accused of wrongdoing.
The complaint said judicial intervention is necessary, referring to Securities and Exchange Commission Chairman Jay Clayton’s September 2017 statements indicating ICOs qualify as securities. The SEC and various state securities regulators have taken enforcement actions against some ICOs, but no federal judge has yet reached a final decision in a securities class action against one.
The investors’ complaint also named Paragon’s founders, including VerSteeg, who previously ran a medical marijuana delivery service.
Paragon representatives couldn’t be reached for comment. According to a Bloomberg report, VerSteeg said in September she wasn’t worried about an SEC enforcement action because Paragon’s coin was a utility, not a security.
A class action filed last week against BitConnect International PLC sought damages not just from the ICO, but also from social media personalities who promoted its offering.
The case is Davy v. Paragon Coin Inc. , N.D. Cal., No. 3:18-cv-00671, complaint filed 1/30/18 .
To contact the reporter on this story: Jennifer Bennett in Washington at email@example.com
To contact the editor responsible for this story: Seth Stern at firstname.lastname@example.org
Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)