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Paragon Coin ICO Was Sale of Unregistered Securities, Says Class Action

What does an initial coin offering (ICO) for a cryptocurrency have to do with “pulling the cannabis community from marginalized to mainstream”? The complaint for this class action attempts to explain, but in the end the allegation is the sale of unregistered securities.

The class for this action is all investors in the Paragon ICO who are being harmed by defendants’ actions.

The defendants are Paragon Coin, Inc.; Jessica VerSteeg, a former Miss Iowa who owned a marijuana delivery service; and Egor Lavrov, her husband, who (according to the complaint) claims to have made “multiple multimillion dollar exits” from former projects and calls himself a “cult figure” for a “new group of young Russians defined by their conspicuous consumption as well as their open disdain for poverty.”

The complaint quotes part of Paragon’s “mission statement” for the ICO as follows: “Paragon seeks to pull the cannabis community from marginalized to mainstream by building blockchain into every step of the cannabis industry and by working toward full legalization. Our strength lies in the unique blockchain/cannabis connection that uses smart contracts.”

On August 15, 2017, the defendants put out Paragon Whitepaper Version 1.0, which the complaint claims described Paragon as “providing solutions for essentially every issue facing the cannabis industry.” However, the complaint says the paper “can best be described as overly ambitious, vague, and impractical” as it mixes issues such as payment, paperwork, potency verification, records of medical prescriptions, and legalization efforts.

Defendants held an ICO “presale” from August 15 through September 15, 2017 at which they claimed to have sold 70 million PRG tokens, priced between $0.75 and $0.90 (paid for in other cryptocurrencies). From September 15 through October 16, 2017, they held an ICO “crowd sale” at which PRG tokens were sold at between $1 and $2.50. The complaint estimates that the defendants made at least $70 million from the sales.

During the promotion and sale of the coins, the complaint claims that the defendants referred to buyers of the coins as “investors” and said that they intended to “keep the value of PRG strong and growing” and called the token “long term growth assets.”

A posted video also claimed that “you can treat it like an investment” and the Whitepaper said, “PRG is designed to appreciate in value… Our model incentivizes PRG owners to hold their tokens as long term growth assets….” The complaint also claims that the defendants said they would keep a fund of tokens for manipulating token prices.

According to the complaint, the ICO was a sale of unregistered securities, violating Sections 12(a)(1) and 15(a) of the Securities Act of 1933.

Article Type: Lawsuit
Topic: Securities

Most Recent Case Event

Paragon Coin ICO Was Sale of Unregistered Securities Complaint

January 30, 2018

What does an initial coin offering (ICO) for a cryptocurrency have to do with “pulling the cannabis community from marginalized to mainstream”? The complaint for this class action attempts to explain, but in the end the allegation is the sale of unregistered securities, violating Sections 12(a)(1) and 15(a) of the Securities Act of 1933.

paragon_coin_sec_compl.pdf

Case Event History

Paragon Coin ICO Was Sale of Unregistered Securities Complaint

January 30, 2018

What does an initial coin offering (ICO) for a cryptocurrency have to do with “pulling the cannabis community from marginalized to mainstream”? The complaint for this class action attempts to explain, but in the end the allegation is the sale of unregistered securities, violating Sections 12(a)(1) and 15(a) of the Securities Act of 1933.

paragon_coin_sec_compl.pdf
Tags: Offering or Sale of Unregistered Securities, Securities