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A cryptocurrency project looking to transform the pot
industry with blockchain is facing a lawsuit, according to a
Bloomberg Law report.
The suit claims that the offering was not registered
with authorities and that investors want their money
back.
Paragon first drew attention to its initial coin
offering when it got the celebrity endorsement of rapper the
Game.
A cryptocurrency company looking to use blockchain technology to
transform the pot industry has been hit with a lawsuit, according
to a Bloomberg Law report.
Paragon, the blockchain company founded by former Miss Iowa
Jessica Versteeg, did not register its initial coin
offering with the regulators, according to a suit filed with a
district court in California.
The startup raised more than $70 million in its ICO, a
cryptocurrency fundraising method, "which investors now want
back, according to the complaint," Bloomberg Law reported.
"This suit is one of several brought by unhappy investors
against ICOs in the last few months, although no federal court
has yet held that ICOs are subject to securities laws," the
report adds.
A media contact who represented Versteeg in August did not
immediately respond to Business Insider's request for
comment.
When Business Insider first reported on Paragon in August prior
to its ICO, Versteeg said the firm would address "real
problems in the cannabis industry."
"This isn't another Potcoin," she said referring to another
weed-focused cryptocurrency. "People will be pleasantly surprised
with what we are doing."
Celebrities such as rapper The Game drew attention to the ICO
when they endorsed it over social media.
Regulators have been paying closer attention to the ICO market,
which is known for its fair share or big dreams and fraud.
In December, SEC Chairman Jay Clayton had harsh words for ICOs
after the agency shut down an offering. Clayton
said in a blog post that despite claims of not being subject to
regulation, many of the digital coins were in fact securities and
thus subject to the agency’s authority.
"I believe that initial coin offerings – whether they
represent offerings of securities or not – can be effective ways
for entrepreneurs and others to raise funding, including for
innovative projects," he said.
"However, any such activity that involves an offering of
securities must be accompanied by the important disclosures,
processes and other investor protections that our securities laws
require."
The regulator's concern is that ICOs provide a way for companies
to solicit money from small-time investors without properly
disclosing risk.
Graham Rapier contributed reporting.
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