A federal court in California has accepted a plaintiff’s petition for a class-action lawsuit against Paragon Coin, the crypto token of a cannabis firm, for violation of securities law
The company raised $70 million via an initial coin offering (ICO) in 2017. It was planning to make PRG coin the crypto for the cannabis industry.
Though the district court judge cleared the motion for federal claims on June 24, he denied the application for claims on state levels for the token investors based outside California.
“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 ruled.
Though the company is headquartered in California, the judge highlighted the presence of diverse investors as the sale was conducted over the internet.
Troubles with the regulator
The project was first slapped with a class-action lawsuit in January 2018. On pressure from the Securities and Exchange Commission (SEC), the company agreed to register its token as a security. The regulator even slapped a $250,000 penalty to the token issuer.
Despite the settlement with the regulator, the US investors were still stressing for being duped by the company.
Paragon, notably, was another ICO to receive celebrity endorsement – rapper The Game vouched for this project. Later, even he was dragged to court for promoting the cannabis ICO.
Other celebrities including boxing star Floyd Mayweather and rapper DJ Khaled also got into trouble for ICO promotions, one of which turned out to be a complete fraud.
Meanwhile, the US Supreme Court recently ordered that the market regulator cannot impose financial scammers arbitrary penalties and the fines should directly go the victims of the schemes. This ruling will impact many ICOs upon which the SEC imposed heavy fines and even interest.