The Initial Coin Offering (ICO) craze may have cooled off, but regulators in the U.S continue to hunt down projects that raised funds from investors without complying with securities law.
On July 18, the New Jersey Bureau of Securities announced that it had filed a lawsuit against Pocketinns, a blockchain-based startup that raised at least $410,000 when it conducted an ICO in early 2018.
As per the release, Pocketinns, and its President Sarvajnya G. Mada violated local securities law by not registering the offering with the Bureau of Securities. More precisely, the offering itself was not registered with the regulatory body; neither was the President licensed as a securities agent in New Jersey.
During the unregistered ICO which took place between January 15 and January 31, 2018, the Bureau alleged that Pocketinns sold at least $410,000 worth of PINNs token. That figure, however, is relative when compared to the $46 million that would have come in if startup completed the sale of 30 million PINN tokens, possibly the hard cap for the unregistered token offering.
Investors were asked to put in a minimum of 1 Ether, which at the time of the ICO was approximately $728 and promised that they would make some returns if the business were successful.
Such a move according to the lawsuit is a violation of the New Jersey securities law which mandates that such an offering should only be bought into by accredited investors. In fact, alleged evidence showed that only 11 of the 217 participating investors qualified as accredited investors.
New Jersey Attorney General, Gurbir S. Grewal had this to say regarding the lawsuit,
“Our securities laws apply to anyone offering or selling securities in this state, regardless of whether those securities are purchased with U.S. dollars or virtual currencies, and regardless of whether they are distributed in certificated form or through blockchain technology,”
Meanwhile, the lawsuit aims not only to stop Pocketinns from conducting its offering but also to pay the necessary civil monetary penalties. The startup would further have to pay back investors the amount they had raised.
In a similar development, we reported last month that a Texas federal court ordered two Americans Morgan Hunt and Kim Hecroft to pay $400,000 for carrying out a fraudulent Bitcoin scheme.
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