June 25 2020 | AtoZ Markets – A federal judge in Califonia has approved an investor class in a lawsuit alleging that the cannabis crypto firm Paragon Coin Inc violated securities laws in its 2017 initial coin offering (ICO) that raised $70 million.
Paragon Coin, now bankrupt, promoted its ‘PRG’ tokens as comprising a currency for the rapidly emerging cannabis industry. The firm even hired popular rapper The Game to promote the offering
Details of the Paragon Coin lawsuit
On June 24, U.S. District Judge Jeffrey White granted the plaintiffs’ motion in-part on federal claims. However, he denied applications for claims at the state level on the behalf of investors based outside of California.
The suit argues that ParagonCoin claimed to have issued PRG from its headquarters in California. Nevertheless, Judge White highlighted the presence of diverse investors as the sale of PRG tokens were conducted over the internet.
“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,” the judge added.
Popular rapper The Game promoted Paragon Coin
The class-action was first brought against ParagonCoin in January 2018 by Astley Davy. According to the investor, Paragon Coin should disgorge its earnings for allegedly failing to register its token sale with the Securities and Exchange Commission (SEC).
Read also: SEC Announces Whistleblower Award of $125,000
Moreover, the complaint noted that PRG had been promoted as a currency for the cannabis sector, adding that the firm had hired prominent rapper The Game to promote its token sale — who became embroiled in the lawsuit later that year.
Other celebrities including boxing champion, Floyd Mayweather, rapper DJ Khaled and rapper Ghostface Killah, also got into trouble for ICO promotions, one of which turned out to be a complete fraud.
Related Article: SEC Fines Steven Seagal $350,000 For Unlawful ICO Promotion
In November 2018, SEC imposed civil penalties on ParagonCoin for failing to register their token sale. At the time, the regulator described the enforcement actions as the “first.”
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