Paragon Coin is getting ready to face a significant class-action lawsuit over the legitimacy of its Initial Coin Offering (ICO). According to Bloomberg Law, a federal judge in California has certified a class of investors in the lawsuit. The class-action is now ready to proceed to court.
Terms Set for The Class-Action to Move Forward
Paragon Coin conducted an ICO in 2017, where the company raised $70 million. The firm had promoted its PRG digital token as a currency for the cannabis industry. However, it is now facing a suit claiming that the ICO had violated federal securities laws.
Yesterday, United States District Court Judge Jeffrey White ranted the plaintiffs’ motion-in-part on federal claims. However, he also denied applications for state-level allegations that were filed by several non-California-based investors.
Paragon Coin first got on the radar of investors in January 2018. At the time, Astley Davy, one of the firm’s investors, led a class of others to demand that the company be forced to reveal its earnings.
The company also got in trouble with the United States Securities and Exchange Commission (SEC), which claimed that it hadn’t registered its token. After much pressure, the SEC got it to agree to a token registration and also pay a $250,000 fine.
The Wall Street Journal reported at the time that the company didn’t deny or agree to claims from the SEC. However, the order in the settlement term will require the firm to file financial statements that have been audited by third parties. The firm also agreed to file other disclosures aimed at protecting investors – quite similar to what is required of Initial Public Offerings (IPOs).
Paragon’s Troubles Compounding
Despite that, however, investors are still claiming that the company duped them. The lawsuit alleges that Paragon Coin claimed to have issued the digital token from its head office in California. However, Judge White notes that the lawsuit alludes to the company selling the tokens over the Internet. The judge added, “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.”
Like several alleged ICO scams, Paragon Coin also leveraged on celebrity endorsements. The company tapped The Game, a famous rapper, to be a spokesperson. Soon enough, the rapper got embroiled into its legal woes as well.
According to reports, The Game promoted Paragon Coin on social media aggressively. He shared several social media materials with the company’s chief executive, Jessica Versteeg, promoting the coin. The rapper also allegedly served as a member of the company’s advisory board.
Several other celebrities have also been roped into alleged ICO scams over the past few years. Comedian Kevin Hart, rapper T.I., and music producer DJ Khaled are some of the most prominent names. Many of them have had to pay hefty fines and agree to cease promoting crypto companies in the process.