Paragon Coin will face federal claims from a class-action lawsuit alleging that the firm’s $70 million ICO from 2017 violated securities laws.
Coin Telegraph reports….
A Californian federal judge has certified an investor class in a lawsuit alleging that the cannabis crypto firm Paragon Coin Inc violated securities laws in its 2017 initial coin offering (ICO) that raised $70 million.
Paragon Coin promoted their ‘PRG’ tokens as comprising a currency for the cannabis industry and hired popular rapper The Game to promote the offering
$70m crypto cannabis ICO to face federal claims
On June 24, U.S. District Judge Jeffrey White granted the plaintiffs’ motion in-part on federal claims, however, he denied applications for claims at the state level on the behalf of investors based outside of California.
While the suit argues that ParagonCoin claimed to have issued PRG from its headquarters in California, Judge White noted that “the ICO giving rise to plaintiffs’ claims and purchases of PRG tokens were conducted over the internet.”
“Plaintiffs concede there may be class members in all 50 states and concede that laws governing the state law claims at issue differ among jurisdictions in such a way that a true conflict exists,” the judge added.
Paragon Coin promoted by The Game
The class-action was first brought against ParagonCoin in January 2018, with investor Astley Davy claiming that Paragon Coin should be forced to disgorge its earnings for allegedly failing to register its token sale with the Securities and Exchange Commission (SEC).
The complaint noted that PRG had been promoted as a currency for the cannabis sector, adding that the firm had hired prominent rapper The Game to promote its token sale — who became embroiled in the lawsuit later that year.
In November 2018, ParagonCoin was among two ICO issuers against which the SEC imposed civil penalties solely for failing to register their token sale — with the enforcement actions described as a “first” by the regulator at the time.
Our goal was to build a much-needed decentralized solution for the cannabis industry, however, our plans were impossible to achieve due to several legal mistakes.
We never considered ourselves experts in the matter of US securities, therefore we sought out the guidance of highly recommended lawyers that were supposed to help, unfortunately they misguided and failed us.
We did our best to launch the product, but most of our resources were allocated to legal battles and compliance requirements.
After a strong consideration and evaluation of the current situation, we are sorry to announce that we are filing for bankruptcy.
We would like to thank everyone who believed in us, thank all of the team members that were with us, and to send our deepest apologies to our beloved community.
SEC-Fined Crypto Project Abandons Cannabis Co-Working Venture
A cryptocurrency project previously sanctioned by the U.S. Securities and Exchange Commission (SEC) is selling a property that it had intended to use as a cannabis co-working space.
The firm, ParagonCoin, revealed the news in a filing with the SEC late last month, stating that, while it had anticipated that its native PRG token could be used by marijuana-industry startups to pay rent for the shared office space, the property is now under contract for sale.
ParagonCoin has put a price tag of $4.2 million on the space, which was purchased for $3.75 million via a $2.45 million loan and cash holdings. The total amount paid for the property was $4.02 million as of May 2018, including interest.
The firm said in the filing:
“We currently do not intend to renovate, improve, or develop other properties. We currently do not intend to make further investments in real estate or acquire any interests in real estate and do not intend to make investments in real estate mortgages.
ParagonCoin explained it will now focus on the continued development of its blockchain “track and trace” software product for use in the cannabis business and potentially other industries. Transactions on the system are paid for with PRGs.
Last November, the SEC agreed to register the tokens as securities after the firm settled charges relating to its 2017 ICO. The firm raised $12 million in the sale in order to “develop and implement its business plan to add blockchain technology to the cannabis industry and work toward legalization of cannabis.”
However, the regulator contended that the startup should have registered its tokens as securities offerings and that it did not qualify for a registration exemption. As a result, ParagonCoin was forced to refund investors, as well as file periodic reports to the SEC and pay a penalty of $250,000.
The token is currently trading at around $0.11, according to data from CoinMarketCap.