SEC Chairman Jay Clayton has described initial coin offerings (ICOs) for cryptocurrencies as “fertile ground for fraud on investors” and it appears that some investors are belatedly awakening to the value of securities regulations. The complaint for this class action alleges that Giga Watt, Inc.’s recent ICO was an offering and sale of unregistered securities, in violation of the Securities Act of 1933.
The complaint details two subclasses for this action.
The WTT Subclass is all Giga Watt Investors who, between June 1, 2017 and August 7, 2017, transferred Bitcoins, Ether, alternative cryptocurrency, or other forms of money to for Giga Watt’s ICO and who were both not issued their WTT within the timeframe set forth in the Giga Watt White Paper and not provided a refund of their investment, at the rate prevailing at the time of the refund.
The Mining Machinery Subclass is similar, except that the issuance of WTT is replaced by the deployment of their mining machinery and related equipment.
Cryptocurrencies are created by the work of people known as miners. According to the complaint, “The mining process involves compiling recent transactions into blocks and trying to solve a computationally difficult algorithmic puzzle. This work typically requires several computers working together to be running 24-hours-a-day.” It adds, “The miner who first solves the puzzle gets to place the next block on the blockchain and claim the rewards” for those efforts.
Giga Watt claimed to be developing a center of high-capacity equipment for “a full range of mining services from hosting, maintenance, and repair to private blockchain servicing (the ‘Giga Watt Project’).” It also claimed it could purchase, set up, and host mining equipment for others.
For each investment of Bitcoin, Ether, or fiat currency, Giga Watt claimed it would provide either (1) cryptocurrency Giga Watt tokens that would give the investor the right to use the Giga Watt Project’s capacity for fifty years, or (2) mining equipment and power supplies, to be set up and hosted by the Project. However, investors would not be given these things until a specific batch of tokens or machinery was released.
The complaint goes on to detail “the one-sided terms imposed upon” investors, including retaining sole discretion over “when, if ever, an investor token release would occur or an investor’s mining equipment would be set up and deployed”.
According to the complaint, investors put money into the common enterprise of Giga Watt and expected that the investments would increase in value and provide a return—in other words, that Giga Watt was offering and selling unregistered securities, in violation of the 1933 Act. It asks that the investments be rescinded and canceled.
Article Type: LawsuitTopic: Securities
Most Recent Case Event
Giga Watt Cryptocurrency Unregistered Securities Class Action
December 28, 2017
SEC Chairman Jay Clayton has described initial coin offerings (ICOs) for cryptocurrencies as “fertile ground for fraud on investors” and it appears that some investors are belatedly awakening to the value of securities regulations. The complaint for this class action alleges that during its ICO, for each investment, Giga Watt said it would provide either (1) Giga Watt tokens that would give the investor the right to use the Giga Watt Project’s capacity for fifty years, or (2) mining equipment and power supplies, to be set up and hosted by the Project. However, investors would not be given these things until a specific batch of tokens or machinery was released. Many investors are now questioning whether they will ever see their tokens or equipment. The complaint contends that the ICO was an offering and sale of unregistered securities, in violation of the Securities Act of 1933.
giga_watt_ico_sec_compl.pdfCase Event History
Giga Watt Cryptocurrency Unregistered Securities Class Action
December 28, 2017
SEC Chairman Jay Clayton has described initial coin offerings (ICOs) for cryptocurrencies as “fertile ground for fraud on investors” and it appears that some investors are belatedly awakening to the value of securities regulations. The complaint for this class action alleges that during its ICO, for each investment, Giga Watt said it would provide either (1) Giga Watt tokens that would give the investor the right to use the Giga Watt Project’s capacity for fifty years, or (2) mining equipment and power supplies, to be set up and hosted by the Project. However, investors would not be given these things until a specific batch of tokens or machinery was released. Many investors are now questioning whether they will ever see their tokens or equipment. The complaint contends that the ICO was an offering and sale of unregistered securities, in violation of the Securities Act of 1933.
giga_watt_ico_sec_compl.pdf